Breaking Free of the Golden Handcuffs
A lot of the conversations I’ve been having recently all center around the same
roadblock – “How can I move? I have a 3% interest rate?” I call that the golden
handcuffs. And let’s just call it what it is – a major blessing. If you own your home right
now and were able to get your interest rate anywhere below a 4%, that is an immense
blessing. But what happens when that home, with that interest rate, just isn’t the right
house anymore? Should you stay or should you go?
Here’s the big idea: Don't let yesterday's mortgage decide tomorrow's life. An
incredible interest rate is valuable, but it isn’t priceless. In a moment, I’m going to break
down the math on someone selling/renting and buying a new home with a higher
interest rate but for now, I want to pose some questions for you to consider:
1. Is this home still serving your family?
2. Is your commute costing you hours every week?
3. Have your kids outgrown the space?
4. Are you avoiding a move because of the rate—or because moving feels
overwhelming?
5. Has something in your life changed and your needs have changed too? Your mortgage rate is one factor in the decision, not the decision itself. A 3% interest
rate in a home that no longer fits your family is no longer golden…more like rusted
bronze.
The point is, just because you have an amazing rate does not mean you should die in
that home. Life changes, rates change, everything changes. My wife and I are literally
going through this process right now. We are going to sell our home (and 2.85% interest
rate) and move to a new home and its 6.5% interest rate. Am I excited about the new
interest rate? Absolutely not. BUT, am I excited that my kids can have more room to run,
more space in the home, my wife has a better fit to homeschool the kids, etc…
absolutely I am. It’s worth the trade-off.
Here’s the math and how I’ve been advising people. Two options with your current home:
1. Sell – take the equity from your sale (you likely have a really good amount
thanks to covid-inflated values) – all the equity goes towards your down
payment on the new home AND to pay down your interest rate (if needed).
My wife and I are taking this option, and because of it, we will be able to
buy our rate down from 6.5% to 5.5%, saving us roughly $500/month.
2. Rent – you could rent your current home and use that cashflow to pay part
of your new mortgage. For example, rent your home and make a profit of $1,000/month. That $1,000 offsets some of the mortgage on the new house.
The good news is – you have options. If you currently own your home, you likely have an
amazing interest rate AND amazing equity OR you just recently took advantage of what
I described here and are in a new home in good shape.
Staying in your current home with your current rate may absolutely be the right option
for you. That’s for you to decide, and I would gladly help you process through that
decision. For some, the interest rate can be the handcuffs that makes them feel “stuck”
to the wrong house. If that’s you or a friend of yours, there’s a way out that makes sense
financially and gets you in a better-suited home.
I’m always here to help. Always here to process or brainstorm ideas, and I will always
help you explore what is right for YOU. There is no one-size-fits-all approach. There is
only a one-size-fits-you approach.
P.S. I actually wrote this. It was not ChatGPT. Did you see a bunch of weird emojis
everywhere? See? Exactly.