I know this isn't what you asked, but I have a thought on downsizing. If the market in your area has exploded, wouldn't the value of your current home have gone up as well? You might be able to sell your current home at a hefty profit and use the proceeds to fund the purchase of a smaller home, even if it does cost the same as your current home did 5 years ago. Result: smaller mortgage without the hassle of a tenant in your house.
That's a good thought. I'm just struggling with a house that is 1/2 the size costing the same as my current house. Here are the numbers I have
My house -
Purchased in 2010 for $245,000 with interest rate of 4.25%
Currently owe $185,537.74
Current value (according to zillow) is $338,919
So if I sold it, I would have about $130-$150 to use for a downpayment (depending on realtor fees, etc.) Most houses that I've looked at online are going for about $250,000 for 1200-1600 sq ft. If we did decide to down size to one of these, my mortgage would be closer to $120,000 instead of $180,000 and maybe I could get a lower interest rate. Would that be worth it?
Another consideration, is that I live 1mi from work right now and love my bike ride and the ability to go home over lunch. Most other houses are still close enough to easily bike to, but probably not home over lunch.
To throw another wrench into this, we are working to sell my husbands house, 3 bedroom 1 bath that is a 30min bike ride to work for me. We are looking to get a $80,000 from selling it (he bought in 2009) so we are planning to make some profit there. We could consider moving to his house and selling mine. The downside to this is that it is not in a nice central location near bike trails and I would have a significantly longer bike commute.
Although, if we sell both and use the profits from both maybe we could find something smaller and perfect with a very small mortgage.