Author Topic: Downsize in house size worth it (to save $) if we'd pay almost 1.0% higher APR?  (Read 543 times)

thegeebees

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Hi all,
We've been seriously considering selling our (luxuriously large) home of 1902 sq feet and moving to something at 1300 sq ft. We would save on energy consumption, home insurance, and property taxes. We also thought we would save money on our mortgage each month, enabling us to kill our debt faster and invest sooner. As I'm looking at rates though, we locked in our current larger home at 3.375% APR on a fixed 30 year note. Looking at current mortgage rates, we'd be looking at a rate of 4.29% or higher depending on how much variance there is.

It's likely we can't even make the move for another year due to me finishing grad school, and I've heard rumblings of mortgage rates continuing to rise.

What would you do? What are we missing?

Slow2FIRE

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I would make no changes until you finish grad school.  Are you currently employed and planning to stay with the same employer after graduation?  Are you going to be looking for a new job with your increased education?

You should be able to make some rough calculations on mortgage, insurance and property taxes.  Not sure how much energy difference there will be (which house is older and/or most recently had updated energy efficiency components added).

Now, if you can pay off the new house in 10 or 15yrs or get a 15yr mortgage, the difference in APR may not be as impactful.

thegeebees

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  • Posts: 19
Thanks for the reply. Yes, we'd be waiting one year while I finish grad school. Moving closer to work is unlikely due to many variables. In the meantime, having an idea if we are moving would help us push toward preparing the house for sale and downsizing our belongings.

The smaller house is newer, but both homes are pretty new, 11 years and 5 years.

What are your thoughts on the APR rate? No, we would likely be killing our debt and then investing in index funds rather than paying the mortgage off early since the returns are higher in the market.

Thanks Slow2FIRE! Appreciate the feedback.