I’m wondering if it would ever be a sound decision to leave a house with a 2.7% interest rate. I owe $330000 on a 3000 square foot house. However, I live on 3 acres, my husband and I are getting old, and it’s hard to keep up with the lawn, and we live where it’s very snowy. And the electric bills are $800 a month, and snow plowing sometimes is $300 a month, so the landscaping and the size of the yard adds a lot of extra fees to our mortgage. Our taxes are about 4000 for the 3 acres. We’ve thought about downsizing, but we’re afraid that it would be foolish leaving an interest rate of 2.7 . Because in this market, we wouldn’t be able to find something this size for this price. We have no credit card bills and one car payment but no 401k or savings. Should we just stay here for good? We are in Pennsylvania
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As an advisor who considers the entire picture, I have an additional question: What is the sentimental value of your property?
It’s not necessarily unwise to give up a 2.7% rate if you find a new property that offers greater value to your life—such as less maintenance, lower utilities, or reduced taxes.
In your situation, you may need to accept moving from a large, beautiful house on a couple of acres to a simpler home without land. While you might end up paying about the same amount overall due to higher interest rates, you could gain more free time by reducing manual labor.
If you don’t have any retirement savings, I would seriously consider building wealth by focusing on finding a home that costs less than your current one, even if it has a higher interest rate. Use the savings to pay off the mortgage faster or take advantage of the tax savings that come with a retirement account, and be comfortable with a smaller house.
For context, you did get in when mortgage rates were at the bottom, but they’ve been much higher than they are now; for instance, in the early 80s, rates were at an all-time high of around 18%. This might help you feel like you are not losing out as much, because today’s higher interest rates are still only 1/3 of what they were in the 80s.
Hope this helps,
Nathan Mueller MBA
Certified Financial Planner Practitioner®