If you’re thinking it’s a bad time to upgrade to a bigger home – think again.
If you’re wondering why so many Minnesota homeowners are trading in their current homes for a better one – one with more room, more features, or in a better school district – here’s why and how they’re doing it, in today’s environment of rising interest rates and home prices.
We’ve already done the move-up math for you below. It’ll be easy for you to substitute your own monthly loan payment and estimate your own possibilities (although we would be pleased to do this for you!).
Check out this example of how a local couple upgraded to a bigger home with the same monthly payments as their previous one.
Current mortgage details:
A local couple bought a home in March 2017 for $375,000.
They made a 10% down payment.
They qualified for a 30-year, fixed-rate mortgage with a 3.99% interest rate.
This brought their loan balance to $337,500.
Their monthly payments added up to $1,687, and consisted of:
- Principal and interest = $1,609.
- Mortgage insurance (MI) = $78.
If this couple sells their home soon:
Their current loan balance would be around $305,211*.
If they sell their home this month, their current estimated sales price/value at 7.3% annually would add up to around $495,000.
Their costs to sell their current home would include a 6% agent’s fee and + $2,500 fixed costs. This would add up to around $32,200.
Their net proceeds would add up to around $158,000.
If this couple decides to upgrade to a bigger home:
Their estimated closing costs and prepaid expenses would be around $8,000.
They would have around $158,000 on hand to make a down payment on a new home.
Assuming that they qualify for a 30-year, fixed-rate loan with a 3% interest rate, this would give them the same monthly payment they’re already used to paying: $1,687.
This would give them a new home budget of around $400,000.
Add in their down payment of $158,000, and this means…
They can buy a house priced up to $558,000!
“But … I thought home prices were going up.”
Yes, you’re correct – but home equity’s on the way up as well, and it’s rising at record-breaking speeds. Research* from March 2021 found that the average equity in a home had increased 16.2% annually, since the 4th quarter of 2019. This was the biggest increase in seven years.
What does rising equity mean for our couple? They can make a six-figure profit on a home they’ve only owned for four years, and improve their quality of living in a new home that has the same monthly mortgage payments.
Have questions? Reach out!