Dear Moneyist,
My wife and I are currently debating on “upgrading” to a new home as I am worried about rising interest rates and costs of housing.
We currently have a nice three-bedroom home that works for now as we have a toddler and are planning for another in the next year or so. We have owned the home for four years and have a great interest rate (I would hate to give up) and have built up some equity.
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We are young (we are both 30) and have great jobs with a combined annual gross income of $122,000 and growth in our earning potential. There are things we both like and dislike about our current home and are afraid of outgrowing it once we decide to have another child.
Assessing our market and neighborhood, we estimate we could net $35,000 from the sale of our current home. If we do decide to move, we are looking at homes costing $350,000 or less, and do not want to stretch too much on payment.
Furthermore, once we do move, we do not plan on moving until retirement.
Would it be wise to move now?
Pondering home purchaser in Montana
Dear Pondering
There are no right or wrong answers here.
If I tell you to stay put, you’ll probably want to downsize in 20 years, you may curse me when your family gets even larger, and house prices are even — well — pricier. If I tell you to move, you may cast the Moneyist into the darkness for encouraging you to upgrade and take on more debt that you are comfortable with. So I won’t tell you to stay or go. (I’ll leave that to the conflicting opinions among the members of the Facebook Group for this column.)
‘If we all did what home-loan calculators told us, we’d be on a noodle diet until 2048.’
I looked at several home-loan calculators and three insisted (my choice of words) that you could afford a home of close to between $515,000 and $550,000 on a 30-year fixed mortgage with an interest rate of 4.7% and annual property tax of 1.1%, slightly more than the average in your home state. (And zero monthly debt.) That’s with a $50,000 down payment. That said, if we all did what home-loan calculators told us, we’d be on a noodle diet until 2048.
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Buyers face significant headwinds in 2018. Interest rates are expected to rise, and a strong housing market has led to tight inventory, which has helped drive up prices. That said, house prices in your state of Montana have risen approximately 7.2% last year, and are expected to rise just 2.6% this year, according to housing website Zillow. That site also puts the median price of a home in your home state at $299,900.
‘There is no guarantee of peak happiness in this home or any future one, for that matter.’
Do you have a problem that a bunk bed or remodeling can’t fix? Probably not. Of course, you need to be happy in your home. (Well, it helps. And there is no guarantee of peak happiness in this home or any future one, for that matter.) If you’re not sure about moving, maybe you can write a gratitude list of all the things that you love about your current home and location. Then make a list of all the things you believe you would gain by moving.
Feel the warmth of that low interest rate and take your time before making any decisions. You will have to live with the next one for a very long time.
Do you have questions about inheritance, tipping, weddings, family feuds, friends or any tricky issues relating to manners and money? Send them to MarketWatch’s Moneyist and please include the state where you live (no full names will be used).
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