Many homeowners are holding back from moving because they don’t want to give up their low mortgage rate. But in doing so, they may be missing out on long-term equity gains that far outweigh the interest savings. Let’s walk through an example.
The Current Situation
Imagine you own a $400,000 home with a $200,000 mortgage at 4%, with 24 years left. On the surface, it feels smart to stay put…you’ve got a great rate and manageable payments. But what happens if you want to upgrade to a $600,000 home and you keep waiting?
Selling & Buying
Selling your current home at $400,000 and accounting for about 7.5% in selling costs leaves you with around $170,000 in equity. Apply that equity toward your next purchase, and your new loan on a $600,000 home would be roughly $430,000.
At today’s 6.25% for 30 years, your principal and interest would be higher than your current payment. But here’s the bigger picture:
Equity Growth on the New Home
- Appreciation: At an average of 4% annual growth, a $600,000 home could rise to about $730,000 in just 5 years, an increase of $130,000.
- Amortization: Over those 5 years, you’d also pay down about $50,000 in principal on the new loan.
- Combined Equity Gain: That’s about $180,000 in new equity, more than you’d ever gain by staying put in your current $400,000 home.
The Cost of Waiting
If you don’t move, your $400,000 home will still appreciate, but at 4% annually, that’s only about $87,000 in five years. Plus, your mortgage paydown would be much less since your loan balance is lower and further into amortization.
By staying put, you’re essentially trading short-term savings for long-term opportunity. The gap in wealth-building between the $400,000 home and the $600,000 home widens more every year.
The Smarter Move
Yes, you’ll give up a low rate—but you’ll gain the bigger advantage: a larger asset that appreciates more in dollar terms and builds more equity through amortization. Over time, appreciation on a higher-value home creates significantly more wealth than clinging to a lower-rate mortgage on a smaller property.
Don’t let the fear of losing a low interest rate stop you from moving up. By investing your equity into a larger home today, you benefit from greater appreciation, stronger amortization, and the long-term financial rewards of owning a more valuable property.We can provide a Move Up Analysis to help you see your options.
Looking for the latest real estate market updates, home buying tips, selling strategies, and property insights? Frank Serio delivers expert guidance, local market knowledge, and proven real estate advice to help buyers and sellers succeed in today’s competitive market. Explore valuable resources, discover opportunities, and gain the confidence to make informed decisions. When you’re ready to buy, sell, invest, or simply learn more about your local market, connect with Frank Serio for professional advice backed by decades of results. Serving Ocean View, Bethany Beach, Fenwick Island, Rehoboth Beach, Delaware Beaches, Coastal Delaware, and Ocean City, Maryland for over 40 years.
