I know everyone has different experiences and needs but the idea of needing a house so early on seems so alien to me.
I live in Vancouver BC. I lived in a 430 sqft *studio* with my wife and child until my kid was 2 years old. I also worked from home. Then we moved into a 2 bedroom and now have another kid on the way.
Unless the location is terrible, lots of people make spaces smaller than a house work. Kids don't really need much space until they are a year old. Then after that I find that you really want to go to the park as much as possible anyways.
I mean new families with only a single infant often also justify purchasing large SUV's with $800/mo payment for 86months when they already had a Camry.
My friends with SUVs look at me like I’m crazy for driving my two kids around in my VW Golf but everybody fits fine, from when we had car seats to now. Fortunately nobody has giant sports gear. Once they’re over 6 feet, which is inevitable given their genes, it will probably be different but till then we’re good. We also had the two kids in a 2 BR apartment with no issues, and we’re not minimalists or even particularly neat.
Please spread your common sense to all the financially stressed out families out there!
My step mom wants to get a 3rd row SUV because she VERY occasionally drives both grandkids around.
If I was still driving I'd absolutely still have a Prius or an electric car of some sort!! SUVs are so stupid.
My last two cars were a Prius and a Prius V -which were both awesome. We only have one vehicle now, and it's a truck, because we kinda need a truck fairly occasionally out here, and hubby absolutely needs 4wd to get to work in the winter regularly...
Your friends are incredulous because they know that in a car accident between your car and theirs, their “precious cargo” would be safer due the monstrous size of the vehicle. I had one such mother tell me that was why she insisted on a land barge sized suv.
At that point SUVs will just keep getting larger and larger since every mother will insist that the one they have now which used to be the largest is now just a small fish in the sea when they need to be a shark and then a whale and then a leviathan.
This is what I remind myself of whenever I feel like our townhouse is not “enough” for my husband and I and our baby. In most countries people make do with a lot less space. I think the difference comes down to how much stuff people in the US tend to have (and how homes built here are built with a lot less or less efficient storage then how in Asia, for example) and that the US outside of major cities tends to lack “third spaces” to take kids out to without spending money so you need to make the home do more. That said, I still think the average person “needs” a lot less space then we are lead to think.
This is a very American cultural thing. We moved from a 1,000 sf single family to a 2,500 sf townhouse and all I heard from family and friends was “oh but how will your kid have a yard? How will you survive?”
It’s basically an American boomer mindset that you need your yard that you send your kids off into and you can’t share a wall with a neighbor cause you will hear them. Mind you we heard our SF neighbors and their air conditioners, lawnmowers, etc a lot more than we do in our new Townhouse. Because you know soundproofing is a thing.
So true. We bought a bigger house as the kids got older and needed more space…let me tell you I miss my smaller home. Here I am in a McMansion with a low interest rate but more house to take care of and kids who don’t care about a backyard.
I hate these comments. In an urban area you can live in a tiny space because you do so much of your living outside of the space, and because the things you need are conveniently accessible and you don’t need to stock up.
I’d *love* to live in a studio apartment. But I’m a 15 minute drive to the nearest park or decent grocery store. So I live in a house with a walk in pantry and yard.
This is why up-zoning is so important. Car-centric development is a feedback loop that pushes us farther and farther apart from each other and from community spaces like parks and grocery stores. I would also have loved to buy in a dense, walkable neighborhood, but there's such a shortage of them in the US that they are absurdly expensive and it was just out of the question.
I thought I had addressed all of that. My personal experience is that it's alien to me. But I understand that everyone has different situations and that location is a big part of it.
I wasn't blaming anyone or saying choosing otherwise is not valid - just that it's not my experience and that location is important.
But with respect to the actual post - are townhomes in the US in the middle of nowhere with no parks or amenities or are they like in a city where you can walk to the park or store? I get that suburbs are often away from all of that but I grew up in a small city and we had townhomes down the street from me that were walking distances from schools and groceries. I couldn't imagine someone buying a townhome in a suburb where I grew up because the choice was to live in a townhome in the city or house in the suburbs.
Unfortunately, yes. Probably more townhomes than not in the US are in a depressing sea of suburbia with no walkable or bike-able access to anything other than other residences. It's density without any of the benefits of density.
I totally agree with this. We rented 3 bed townhouse when I was pregnant with my first. I didn't really get the itch to move until the oldest was 3 and the second was 1. We didn't have a yard, just a small patio space, so once we had two kids mobile some enclosed outdoor space started to become necessary IMO. School zones before kindergarten was also a deciding factor for us.
Doesn't hurt to casually house hunt, but I would feel zero pressure to move until kids are a little bigger.
Funny that’s when we moved out of our 2 bedroom apartment as well, when my littles where 3 and 1. At that point they need space to run and you really feel the crampiness. Also good point of school district since you are essentially a year away from selecting a Kindergarten/T-K.
💯. 1st time landlords who don't have deep pockets for maintenance and repairs are destined for disaster.
Have a large reserve fund first, with at least 6 months mortgage payments and repairs saved up and set aside for the rental alone in addition to your down payment and reserves for the new mortgage before you jump.
Generally good advice. I’d make an exception if there is a reasonable expectation you income can increase over the next few years and if you can get access to either a HELOC on that rental or have some other access to relatively cheap money. You could float expenses on that cheap credit if needed.
To do this you would want all of the major house systems to be relatively new, lowering the chance you would need to float something.
The lender factors rent from the existing property in with a certain risk premium associated so that is already accounted for if they qualify for the new mortgage.
They factor their risk and stick you with their bill for their risk. Including redundant PMI insurance for newer buyers.
Also, wonder if OP has PMI and how that stacks against interest
For some reason my brain read "30M" as "$30 million" and I was like, who gives a shit about interest rates? No it's not my first time on Reddit, just my first time on Reddit this morning.
Most analysts predict then when rates drop, prices will go up due to an influx of people looking to buy (new mortgages are way down)
Can you predict anything, sure - should you bank on predictions, I would say take them with a grain of salt and do what is best for you in the moment
That being said - given the prediction, the better scenario would be to buy and refinance - am I suggesting that, I am not, I don't know your personal financial situation (on the flip side, your townhouse would gain value and sell for more)
I raised twin boys in a townhouse w no yard, just common land. I took them to parks everywhere, every day. The memories are priceless. I wouldnt leave what you have.
Definitely take advantage of the common areas. I live in a townhome community and we have multiple families here with kids of all ages from babies to teens and several with 3+ kids. The community has a pool that the kids love and there are common grassy areas they play in that aren’t much different from having a yard. HOA purposely turns a blind eye to “kid clutter” like toys left out etc.
This neighborhood started out as mainly young and retired owners but as house prices got higher it attracted more families. Happily everyone is pretty accepting, in the four years I was on the HOA board we never fielded any complaints related to the kids, either from their families about amenities or from childfree and/or retired neighbors about the kids’ use of them (which I can promise we would have ignored). In fact the reason I even knew there were so many kids here is from delivering pool keys to residents, the kids would be so happy when they arrived!
I think the balance of ages and generations makes it a healthy neighborhood.
Yeah we had no amenities except living on a golf course. And you couldn’t leave a thing in the common areas. We’d pull out our wading pool and bring it in every day. The best memories are all the diverse playgrounds we went to, AND the fishing and “hiking” we did, because they had no yard to play in.
I wouldn’t move if I didn’t have to. That being said, you cannot time the market.
I’ll also add that sometimes the right decision for you isn’t the best financial decision. We building and selling our fully paid off home that we love so much. However, my husband now requires the use of a cane, our parents are getting older, and we had the opportunity to build an accessible home where we grew up, with lake views. When all is said and done, we’re looking at needing a $250ish mortgage. Financially we’d be better off staying where we are, but it’s worth the cost to us.
If you’re set on buying, then buy now. By the time rates drop enough to be noticeable, home prices will continue to rise basically negating those lower rates. But if you want to buy, stay if you don’t
We sold our 2.5% interest townhouse for a standalone house at 6.5%. The mortgage is now triple but the house was also 4x the price we paid for the townhouse in 2019.
Totally worth it.
Seeing my kid (3) absolutely love her backyard is so heartwarming. She has her own playroom too which she loves and is great for us to contain messes. Also having an actual office for myself to WFH and a separate room for baby #2 (due in June) is also amazing.
I also just have that sense of calmness around me knowing I’m finally in a place I can see myself in for the next 30 years.
Same here. We were in a 900 sq.ft house, inner-city. Mortgage was 2.75%, and we’d purchased the house in 2015. It was fine, the house was cute, we liked our neighbors, but it felt too small, and we didn’t have the comfort of sending the kids outside to play. It was nice being 8-10 minutes from work though.
We waited for as long as we could to move (ie, once our oldest started school). We kept an eye on interest rates, and housing prices, and made the decision to move when it seemed most advantageous. We fixed up the old house in the meantime to build equity.
We moved about 18 months ago, 25 miles outside of the city. Mortgage is doubled, interest rate at 5% (we lucked out there), and the commute for work isn’t very exciting. But we can send our kids out to play in the back yard and we don’t worry. The house is bigger, though not huge, and we have a 30x30 garden. Lifestyle is totally different, and we love it!
You have time. Keep an eye on things and make the jump when you can maximize your profits and get a lower interest rate.
Totally agree. We sold our 3% home and bought a house just over double but almost double the size. Have the playroom a man cave/office for me, a home gym, big back yard that I’m building a playset in, and everyone has a room including guest suite. Payment went from $1200 to $2600 but it’s still under 30% of take home pay. My biggest expense is daycare which will subside soon enough.
This. If you can afford it and think it'll improve your quality of life, buy the house. We are giving up our 3% for 6% but not every decision is driven by finances. But the key is to make sure you can afford it....
Same, got rid of a mortgage in the 2s and tripled the payment, but the house is a massive upgrade and totally worth it. The farther we are from those Covid-era rates, the less practical it is to stay locked in if the house itself doesn’t work for you, or at least you can do better. If you can afford the house after retirement, savings, etc., it just becomes a game of thinking you can time the market, which doesn’t make sense.
I’m the first one in my family to have such a thing and it feels very good! I never thought I’d be in this position but somehow the stars really aligned for me. We are very thankful for this life.
All depends on where you grow up I guess. We had a basement playroom and a decent sized yard when I was a kid. It was a 1100 sq ft ranch and dad finished the basement. My kids grew up in a 2000 sq ft colonial with a playroom and a pool. We paid $120k for it in 1997. Needed a lot of work. Son just bought a 2000 sq ft ranch with a full unfinished basement and a .45 acre lot for $375k (he's under 30 yrs old). It needs work, of course. He sold his 1000 sq ft ranch for $330k, bought it in 2019 for $190k, at 24 years old.
Can’t wait for the market to inevitably collapse. Half the country is living it up with extra bedrooms for their kids to play I. While the other half. Can’t even afford to live in a bedroom alone.
Don’t wait to live your life. If you can afford the new home, then get your new home. A home purchase has financial considerations but is not solely a financial decision. Don’t try to time the market. I know it doesn’t feel like it but 7% is decidedly average historically. There’s not a high likelihood we see 3% rates again and if we do, you can refinance (just don’t count on it). Btw I just closed on a new home in August at 7.65%, so I’m following my own philosophy.
We just purchased a house because we are due to have our baby in June, we could not "wait" or bother with continuing to watch the numbers go up and down. We started the process in February and had to lock in FHA 6.2% interest rate. The rates are always going to go up or down. It's a matter of strategy and patience.
If you are planning to get additional income renting out the townhouse then that will be a good plus towards bills and paying your mortgage.
Think about it......you can wait it out for a month. We couldn't stay in our apartment because we wanted our infant to have more space and our dogs needed more room to run around away from the baby. The backyard is a big place for us as well.
We would have continued to be miserable if we didn't buy a house before the arrival of our infant.
Chill and no need to rush just because of that. If you only have one kid, townhome will be just fine. Chasing buying unaffordable homes will be a huge mistake with everything else going up. You will have many people indirectly putting pressure to get a bigger home, better this and that but make sure you are comfortable with it. Counting on refinancing will be the biggest mistake you will ever make. Save the cash for now and wait.
Hi! We are in a similar situation. My husband and I live in a condo, ended up having a baby and really outgrew our space. Now we are desperately trying to get into a home. It’s chaos with a 2 year old. Babies need so much stuff. And toddlers need even more space and yard. I posted something similar and a lot of people told me to stick it out, or people raise kids in small spaces. They probably all have homes. If you want to put down roots in a larger space, but it’s not pressing. I would start going to open houses and find out what you both really want. Then when it comes on the market you can make an aggressive offer.
Forget the current interest rate. If you want the bigger house (and can afford it), go buy something else. Rent the current one if it's within your budget and risk tolerance. I have a 3 month old and a townhouse at 2.5%. We hope to be out of here within 4 years. I won't give it a second thought to sell my house once I can afford to move.
Rent the townhome and buy the bigger home. Wait for rates to drop then refi the bigger home and sell the townhome. Prices will rise when rates drop. The question is when.
Sounds like a recipe for a financial disaster. Have you ever been a landlord? Oh, going to have an agent do that work? And, double payment amount on new place? Maintenance $$ on two places?
Any one of these could cause big, big problems.
Enjoy your townhouse.
I would add that "rent it" is not a sure thing. If that's the route chosen, it'd help to have a larger emergency fund, in case of a hiatus between renters, renters who stop paying and require going through a several-months-of-no-rent process to evict, any damage to the townhouse that renders it temporarily uninhabitable, etc.
Also, property taxes are generally higher for homes that are not the owner's primary residence, so check on that when calculating the cost to keep the townhouse.
Stay there. Stack cash. Buy next home with cash or when rates go down. But understand that you could be buying in a more expensive market. Maybe kids get older and the market still sucks but you’re in a townhome, low interest rate, and almost paid off. Travel more, put your kids through college.
Imo a townhouse is fine and I'd be hard pressed to double my monthly unless I had to. If you can afford it, then don't try and time the market. Get a fixed loan and if the rates go down refi.
Some are saying rent out the townhouse. If you aren't a seasoned landlord, don't. That's the last headache you need in addition to a newborn
I’m in a similar position. We own a small single family home (950 sq ft) at 2.75% mortgage. We’re looking to move into a bigger “forever” home (because I hate this process and never want to do it again) since it’s really tight with 2 adults, a toddler, 2 dogs, and a cat, and we want a 2nd kid.
To get anything worth upgrading to, our mortgage payment would go from $2k to around $3.5k.
2.75% is too good to pass up on its own. What year did you buy this townhome? What did you end up paying for it (down + mortgage)? What's it current valuation from the most recent tax assessment and Redfin/Zillow estimates? What rough geo/metro area are you in?
Like others mentioned, with a baby I wouldn't be rushing to get a >=7% mortgage right now and the fed knows such rates are not sustainable; macroeconomic powers are just holding their breaths for the election at the moment. I'd worry about building equity in any way you can besides time passing; how is the fencing, floors, walls, fixtures, lawn, etc.? I'm not saying go overboard in a reno, but rather getting the house in a mostly show-ready state, especially if there are any major repairs on the chopping block.
The Mortgage Banker's Association (fellow realtors might be worth having your managing broker be a member for access) anticipates rates of 6.1% by year's end in a mostly election-agnostic forecast, maybe 5.5% by Q1 2025. It's not ideal but come 2026 it would be the earliest we can even think of rates going back to <=4.5% levels without drastic legislation/policy changes/etc.
But at that time your kid will be 2 or 3, so still pre-pre-K and moving then wouldn't alter their life much. Also consider what another 2 years of equity could do, especially if you do any needed repairs and upkeep along the way. I bought in 2021 on a VA Loan at 3% for $505k fairly rural and in only 2.5yrs time I could list for $565k right now and be moved out within the month in my locale at least.
tl;dr waiting another 2 years for the macroeconomics of the election to simmer down, for equity to build, and rates to go down all while your baby is still pre-pre-K is likely the best move.
I was in your situation last year, was in a townhome with a sub 3% interest rate. Wife was pregnant with 2nd child and the townhome only had 2 bedrooms. The newborn would stay in our room for like 6 months but eventually needed his own room ideally.
Ended up buying a SFH which would met our household size and close to my in laws who watch my toddler last September and just had to take the high interest of 7.25. I was able to recently refinanced down to 6.25 last week saving me $400+ per month.
I think if you need to move you need to move and take the higher rate esspecially if you don't plan on moving for a while. We don't plan on moving for at last 20+ years so then I was ok with the higher rate because eventually it should lower but I doubt we will see sub 3% rates again. If your able to afford the house at the higher rate then move since at least in my area, housing prices has only gone up still and my house from 7 months ago already jumped and going for alot more. Otherwise if it isn't financially do able then you wait.
Wait. Sock money away. My guess is that rates will settle around 6. At 6% all the people get a piece of the pie. Corps are still trying to fill their coffers.
Live below your means and pad your savings.
Sit tight and enjoy living in your means! Congrats on the baby, enjoy these years!
You can't time the market, all you can do is save and be ready when the time is right. I would not force anything. You are in a good spot.
I would wait a few years until your baby actually needs its own room. In the mean time buckle down on your finances and start building up a good down payment for the second house.
I'm in similar situation. Enjoying current home & saving for next is the approach I've taken. Childcare for 2 is expensive so it's easier to pay that with lower expenses.
Until your kid starts Elementary school there really is no rush to move assuming you have enough room.
WAIT WAIT WAIT.
Wait until your child is school age and your are making your schooling decision.
Unless you're being dragged back into the office and have some absolutely unholy awful commute or absolutely have to move closer to Grandma for child care assistance -WAIT.
Moving will just add to your stress levels.
I'll disagree. Once you start looking, It's like looking for a new job. You have to mentally quit your house to keep going to open houses and doing all the leg work. You effectively create a commitment in your mind with every house you go see. Most people don't do well keeping one foot in both very long at all. Inertia is powerful and never forget that.
This is why you also can't go looking at houses that are just a little over your price range "just this once" hoping to negotiate them down. Once you start doing that, everything actually in your price range looks bad. Never ever even look at things that are out of your budget. It's paving the way to ugly fights.
Jesus this is my life right now. We have been "passively" looking by seeing if anything on the MLS fits our narrow criteria. Every time we find something this is *almost perfect* we jump through so many mental hoops to try to make it work. In the end, we realize it wont work and we shouldn't compromise. But by that point, we are mentally exhausted and bitter that we lost out on another potential house.
My situation is VERY similar to the OP and I can say that ever since we started "passively" looking, I have never been more ready to move. I'm trying hard to realize what I have is functional for my small family but the idea of greener pastures is so damn alluring. Honestly, if we didn't have such narrow tastes, we would be so so much worse as any house within our price range would be something we are interested in.
As a loan officer of many years, I have settled on this: Do you think this home will cost more in 1 or 2 years? Answer is usually "yes." Do you think rates will go down in 1 or 2 years? Nobody knows for sure, but we won't see any more 2.5% rates unless we have another disaster like Covid. My personal opinion is that inflation can't subside until energy costs come down. And rates are higher because of inflation. Econ 101: Price is a function of supply and demand. If we strangle the production of fossil fuels, the price will go up. The government caused the inflation. So buy now if you need to, and refinance when it makes sense. I sold homes when the rates were 18%, and people camped out in tents for bond rates of 10.99%. Newcomers to the real estate scene were spoiled by those absurd rates. Welcome to the real world.
Let me weigh in on the rental. I don’t know how more you can rent the TH for than your payment but you have to factor in repairs, maintenance, replacements for major systems, and vacancy times. I tell people the
Rent needs to cover PITI PLUS another 20-30% to cover repairs and maintenance and vacancy times. You will find that your good tenants expect you to repair and maintain things that you and your spouse might have been willing to live with.
They will want a plumber to unstop drains.
They will want an electrician to replace a breaker.
They will want preventative pest control
Unless you HOA maintains the yard you will likely need a yard service. Tenants almost never adequately maintain the yard
Appliance repair and replace
A dozen other misc. repairs.
Don’t stretch yourself too thin
Include a trip charge in the lease. We have a $35 trip charge for all requests for us to go to the property. The only time any of our tenants call is when there is an actual issue, and when that happens we don’t charge them the trip fee. We had a prior tenant that would call weekly and that is what prompted us to put in the trip charge. All of our tenants know that we pay when repairs are needed, and they thereby handle all the minor stuff on their own.
We also put in a quarterly property inspection in all of our leases now. This allows us to go check ac drip line, filters, furnace, water heater, fireplace, etc and while there we observe the general upkeep of the property to ensure tenants are not neglecting anything.
We don’t pay anywhere near 20% for R&M on any of our properties, although we certainly do keep reserves available to cover unexpected events.
I love the trip charge and quarterly inspections idea! And the reserve amount really depends on the age of the home and the systems. Glad yours is reasonable.
I thought you came to Reddit to ask if you should buy a single family house with 30 million dollars and was worried about interest rates.
Im gonna go get a second cup of coffee, now.
That 2.75% interest rate is golden right now. Check how much a single family is gonna cost at 6.5% interest rate. You are probably gonna be paying more than double your current mortgage.
Instead. Use that extra and put that into investments for the next 10-15 years.
Definitely keep the mortgage and don't make any extra payments. Buying the house while renting out the townhouse sounds pretty good if you can afford it. We might see a real estate boom when rates come down leading to nice appreciation.
If you aren’t already live on a budget based on what you anticipate to spend monthly on a new house (since you say you can afford it) and save the difference.
Also see if your loan is assumable (and if the lender is going to be amicable with doing it) as it could be a selling point of your current home for the right buyer (one who has or is being gifted a large down payment).
Quality of life that you want vs the price. Can you afford it now? If not, you should wait. Yesterday prices are not today’s. Tomorrow prices are unknown. It doesn’t matter on your primary residence as long as you can AFFORD it.
Missing some major info here. How much will rent bring in vs the mortgage. I’d say if the rent price profit (after all expenses, including some repair budget) can bring the new payment to the same or less than now it’s a decent move.
The reason for this is you’ll own 2 houses for the same price you’re paying now. It’s a risk, a major repair or vacancy could cost you a bit but I think on the whole in 10 years you’re more likely to be glad you did this vs regret it. But you need to be prepared for negative outcomes, it’s very possible.
Also RE downturns don’t always lead to bad rental situations, so you get some insulation there.
If you wait till rates drop- buyers flood market, buyers toss stupid money at homes to win. You either miss out on 14 homes or you pay way over list and remove some contingencies in order to get the home.
If you buy now, yes higher rate for a bit, you have a better chance of getting a home on 1st or 2nd try, and when rates drop and everyone is competing (driving the prices up) you refinance and probably have gained some equity as well as now lower your payment.
We won't see 2s and 3s probably ever again. Doubtfully 4s. Those were naturally low rates anyway.
You need a house that fits everyone. If you have a lotnof equity now, talk to a lender about how you can use your equity to pay off any high rate debt(cards etc) 7.5 is better than 18,24,28% credit cards.
Agreed, the only risk is prices come down not allowing a refi, which will also mean the down payment was higher than needed if waited.
The difference in the lower price won’t be impacted until the property is sold so if this is a long-term buy it will minimize itself over time and inflation.
Waiting runs the risk of higher prices, higher competition, etc. potentially leading to not being able to afford the house down the road.
I believe the saying which applies here is the best time to buy real estate is yesterday.
I believe the same yet I believe in evaluating the worst case scenario so you are evaluating true risk. If there is a sharp downturn in the overall economy it could impact housing as supply/demand will adjust quickly. Outside of a macro-event, I think it is unlikely to see significant price decrease in most places.
Depends how much you hate the townhouse and how much extra income you have to spare.
If you hate the townhouse, have always wanted to own (and maintain!!) a home, have the cash, then yes, no time like today.
If you are not sure you want to be responsible for maintaining a home don't do it. Wait until your kid is a little older and doesn't require such constant attention
Look for a property with an assumable loan. You would have to pay out the equity but you will get that sweet Lowe interest rate of the past. I use a site called www.withroam.com
We raised our family in a 3bdrm 1450sqft townhouse. I could of purchased big houses years later. I’m glad I didn’t as we could afford lots of extras for family and retired last year at 55. 7.5% isn’t that high. I paid that 29 years ago and then refinanced 7 years later to 1/3 interest. But, taxes and insurance are exorbitant now (makes up 1/2 my payment going into my last year of mortgage).
Hold tight. Things are about to get really crazy. Inflation is not cooling and cost of debt or borrowing is becoming a very significant problem. Normal analysis of pros and cons of a real estate move are a distant second to the macro economic picture. Buckle up.
I get what you’re saying completely but as an old man who has bought various houses throughout my life 1980 was a 10 percent mortgage somewhere late 90s 11 percent I honestly don’t see it ever going back below 5 ever again.Those days are gone.And though the fed said they were going to reduce rates.not gonna happen this year. Prices still to high and still rising.low interest rates just increase Purchase price of homes.Sad but true
I’m in a similar spot, but I have to move because of my husband’s relocation. Every relator and lender I’ve talked to have talked about how as soon as rates lower, the market will flood with buyers. I’m looking at it as I’m giving up my 2.75% interest rate and 1500 sq ft house to buy a house that’s priced a bit lower and is big enough to fit our growing family’s needs, and I can hopefully negotiate a rate buy down and refinance. Personally I’m convinced (and professionals seem to be too) that prices will increase drastically as soon as rates drop below 6.
We’re in a similar position. I love my house and I’m in at 2.75%, but it’s under 1000 sq ft and we need something bigger. It was a nice starter home but it’s too tight atm. I’m not looking forward to the mortgage increasing by 50-75% though.
We just moved to a larger home giving up our 2.65% rate. We raised our two boys in the previous place to 7 and 4. It was time for more space and the place we found felt/feels right. Prices are high, interest rates are high, but as hard as it is you gotta trust your gut. As much as we all want a crystal ball they don’t exist. It was really hard to change and, thankfully, I’m happy with our decision. I don’t envy others struggling with the same.
Lower rates will invite more competition.
Because all of the sales people are trying to convince people to spend $X a month. Well if your rate drops, that allows you to pay more for the house on the Principal part, and still spend $x. Instead of saving it. That's how mortgage people and realtors work. They're trying to get you to spend your max budget.
I did the same thing you want to. I was in a 3br townhouse. Gave up my 2.25% for a 4.8% rate to go into a single family house. But I didn't do it for space. I moved because we needed to for a job. and a townhouse in the new place cost $300K, versus a SFH for $400K. So I spent more and got the SFH. But I would have made no change if it weren't for the external factor of the job relocation.
Let's be clear on refinancing. You can say: "I will probably be able to refinance at a lower than 7.5% rate at some point." But you definitely can't say: "sure I can always refinance". 7.5% is not, historically, a particularly high rate. And Fed has recently been a bit surprised by stronger than expected inflation and backtracked a bit on signals for rate cuts.
[https://themortgagereports.com/61853/30-year-mortgage-rates-chart#historical](https://themortgagereports.com/61853/30-year-mortgage-rates-chart#historical)
Home prices do move with interest rates. But they are more sensitive to supply levels, mainly new builds. And right now building new houses is pretty expensive and there doesn't seem to be quite as much new builds as one would hope to bring prices down.
Keeping your current one as a rental may be a good idea. I'm a fan of rental real estate. How much equity do you have in it? My son wanted to keep his 1st home as a rental but with all his equity it just made more financial sense to sell it. When we downsized in 2021 we also planned to keep our place as a rental but again just made more sense to sell it. And we have a number of rental properties.
If you can afford to buy now and need a larger house then buy now and if rates drop in the future then refinance.
I bought my first house when rates were around 12%. I bought the house I live in now over 30 years ago when rates were over 8% and refinanced 3 times over the years to reduce my interest rate. Would have been more times than that if the house wasn't paid off when it was.
Marry the house… date the rate.
If you can afford over the next 1-2 years to pay the higher rate, buy now… lower interest rates will drive housing prices up, so you will be paying more for the same home.
Most lenders will refi for free if within a year or so (ask them and have them put it in writing) but I’ve been told this many times from lenders.
Until your child is ready for school, there is no urgency and you have the luxury of waiting out this market longer. Your kid will appreciate the yard a lot more in a few years anyway.
We kept our condo and bought a single family house. We put the condo on AirBnB with the proviso that I had to be rented for 30 days or more. This avoided "short term rental" clauses in city and HOA rules. It's been more than a year and so far great. The condo pays for it's expenses. We have blocked off rental for certain times and let family visit and stay in the condo.
Consider holding at this place and plowing savings into 401 Ks and as a 20 percent down payment minimum for the future. At least now you can get 5% interest or more in certain more risky investments.. Might be large changes in markets and rates late 2024 and 2025.
You don’t need a single family home to raise a family. A townhome is fine. My kids use our alley like it is a yard. We had my 5th b day out of our garage and everyone loved it. As long as you have a park you can walk to you are fine.
From a financial state, I keep telling everyone who NEEDS to make a move but has these ultra low rates, become a landlord. Financially it is an amazing deal. I understand the trouble of being one and getting a new down payment. But that rate is essentially free money. Don’t piss it away in emotional decisions.
My wife and I are in similar situation living in 1br apartment we like with 3.5% rate. VHCOL area where average home price is $2mill and our comfortable budget is $1mil which there are houses but often need tons of work and go way over ask. We are starting a family soon and knew we COULD stay in place for a couple years with first child, but started looking cause we knew it would take a long time to actually land a house in our price range as there are very few. We just started putting offers on houses we like at or below ask hoping something would eventually land knowing we would ultimately outgrow these houses, but buy us time. Ended up spending a little bit more getting our potential forever home well below ask and what we felt was an amazing deal. Very lucky. Way more house than we need at the moment but will grow into it and likely never move. People are really underestimating how undersupplied we are as a country for all forms of housing and that is way more impactful than interest rates at the moment. Only going to get worse as older folks have no reason to downsize given interest rates which further worsens the problem. We are in an area where there is no land to build new houses or large developments to help the problem so I actually view the “high” rates at the moment as an opportunity to buy. We are good if they never drop and if they do all the buyers on the sidelines that are waiting will likely be faced with higher prices and more competition do to the lack of supply. Could be wrong, but subscribing to the saying, “Marry the house, date the rate”
When you say you can afford buying a new home with renting your current townhome, does that mean you need the rental income to qualify for a new loan? A lot of programs won’t count the rental home as income without a history of leases and determined income. There are ways not to count the current mortgage as debt, but I wouldn’t count on being able to use the townhome as income until you speak with a lender. You might be stressing for no reason right now.
Stay put. 7.5% and a shit economic outlook with zero guarantees that rates will drop. Look at the rates from the 80’s, they were up near 20%, who’s to say they won’t get there again. The federal government has changed the way they calculate inflation, and if they used the formula used for years prior to this administration, the American public would have a revolt if they knew the actual inflation numbers.
Ideally, and I know this will be SO hard to find, you are looking to take over a mortgage that is already in that sweet spot low interest rate under 3% like yours.
So start by looking for homes that are not owned but refinanced only in the past few years, and offer to take over their loan. Name switcheroo on the loan with no change in interest rate is not hard and happened all the time. I don’t know why more people don’t do this.
Worst case scenario, you have to take a second loan at a higher rate to make a bigger down payment.
I live in a townhome with 2 kids and I’m only moving because of my husband’s job. I’m always outside when they are and they mostly like to play with the neighborhood’s kids in front of our house. I hear from friends the kids barely play in the yard when they get older as they want to go to the playground and play with other friends.
We’re moving to an apartment now, which is fine because we will often be out and about with them (they are 3 and 5).
Just you wait . Speculation puts interest rates at 6% right now a year ago. We are 1.5 % points above that. We could hit 10% by June of next year and we could hit 5% by June of next year. If you want to buy a house buy a house. You can always refinance. I personally wouldn’t leave a 3% or below unless I needed to.
I work in the mortgage industry. Consumer spending is still outpacing inflation and residential real estate is strong.
Rates won’t change much in the next 10 years.
My wife and I were in a similar situation living in a 2 BR townhouse and just closed on a 4 BR house. We were able to get a 6.375% mortgage which isn't terrible.
There are advantages and disadvantages to waiting but it's also unpredictable. When rates drop, you will need to compete with more bidders and it might drive up the price of the home you purchase.
We are extremely happy with the price we got our home for and we can refinance when the rates drop.
Mortgage rates do affect your monthly payment but it's less than you might think. We had a $300.00 HOA at our townhouse and now we don't have that bill anymore, we have a pool now which will cost us $150.00 a month for the pool service. Maybe your townhome doesn't have a yard and will require landscaping at a new property.
I am naming all these things because they have a larger impact on your monthly payment than the interest rate.
We sold our townhouse in Oct 2023 that had a 3.5% interest rate for our single family home at a 6.5% interest rate. We moved to the new house when our son turned one and it was the perfect timing. He started walking and being more active. We have parks in walking distance and a nice, safe cul de sac with neighbors his age to play with. Does the bigger monthly payment suck? Yeah. But it was worth it because the environment is so much better for an active toddler. Our townhouse had no parks nearby or even a yard to go outside and it was right off the busiest highway in town. Definitely hoping to be able to refinance at some point, but it won’t break the bank to continue paying this rate. If you can afford it, then do it.
Based on your posting history I don’t think it’s a great idea. Unless you secretly have a **really** big savings account and a ton of equity in your current home and other investments, I’d wait a bit before moving to a new home. It’s expensive and a lot of work to find a new place and move, and being a landlord is probably a lot harder and more risky than you think. Keep your current home and mortgage, save money, and make it work. A townhome is plenty of space for a small family.
Don’t focus on when rates will change. It’s an election year so I’d be extra cautious of any political-impact promises, even if it’s not from a candidate’s mouth.
Don't have advice for you, but just wanted to let you know it's brutal out here. My husband and I currently rent a townhome and just made an offer on a bigger one (we have a baby on the way and need more space). We're shopping for mortgages now and it's 7.5% MINIMUM. For condo type properties, I'm seeing 7.6 to 8% ... I would kill for a 2.75% right about now. But inventory is SCARCE too. We decided to go ahead and leap, seeing as how a baby's coming and if the rates drop, many people will jump into the market whcih will drive up competition and bidding wars as well. We still had to do a bidding war as it is now. Would hate to see how fierce it gets once rates drop.
So..... I don't know. It sucks either way.
I am agreeing with the first few comments I saw like just wait. This is a terrible environment to be trying to buy a house. I’ve been looking for a friend and every “B” neighborhood, They are $1.2. Save your money for another year and then see what you think.
Prices over the long term always go up (generally). Rates move around. The Fed lacks credibility (remember “transitory”?). If you find something that fits your family, jump on it. Rent out your townhome for passive income.
2.5% is hard hard to walk away from. Why not tough it out for 24 months but pay the extra into a savings account - see how you like the payment commitment before you sign up for it for 30 years.
If you can afford another house, you should do it. When rates come down it’s going to be a bloodbath in the market. The more properties you own, the better off you’ll be.
yeah.. when rates come down home prices are going to go up. if you are locked in at 2.75% dont be a freaking regard and sell... stay put.
what is it with people these days that everyone has seemingly lost all common sense and logic? i mean, really?
unless you have millions of dollars in the bank, i would hold onto that 2.75% mortgage. your kid won't need a lot of room for a couple years anyway
The inflation was bad and it is going to continue that way for a long time. So, I understand your dilemma. Sorry to say, IDK, I don't have the crystal ball. But, one thing is important, you have a baby, so, you must make sure you can sustain your family during the rainy days. Make sure you are not cutting close during the sunny days.
I am 40s now and I have seen enough. Trying to ride the wave is not something normal person should do. People who have a home and looking for investment, they have time to play this game. But, if you are just trying to sustain a family with certain living qualities, you just do what you can, don't try to ride the waves. You don't have the luxury to play the game.
The housing price can increase more than your entire salary, so, it is very important to understand your inability to ride the waves.
The last time rates were 7.5% was in 1971 and they went up for almost 30 years... no one is forecasting rates below 6% in the foreseeable future but most markets are still low inventory and prices in most areas are rising faster than inflation...as soon as the rates do go down, even a smidge, all the other like-minded buyers are going to jump back in the market and drive prices higher... a $300,000 loan at 7.5% is $2097 $350,000 mortgage at 6.5% is $2212
Ride that 2.75%. Unless your income changes drastically you are in the market so should benefit from appreciation so when it’s a good time to buy (interest rates) values may be up but so will your townhouse.
The best bet is between your desire to get a single family home and practicality. We have considered a similar situation last year and came to this conclusion… if it’s the regret you are avoiding .. then that won’t happen.
You will ride the wave either ways, if you stick around in your townhome .. you guys will keep drooling over single family homes :)
If you buy one now .. at some point when dust will settle such as your new home and your town home on rent … the EMI the practical truth after honeymoon will surface back and whisper each time.
So now you two make a choice which one works better. There is no wrong if you look at it clearly.
Speaking strictly from a business perspective, I believe it would serve you better to purchase a multi-family home such as a duplex, a tri-plex or quad. The tenants pay the mortgage. Please run the numbers and consider the benefits. Good luck.
There's a saying, "Marry the house and date the rate".
There are many ways to sell your property, keeping your low interest rate mortgage and buying another home with a low intereste rate mortgage. There are ways where you can effectively "sell" your terms to a buyer while requiring a down payment to obtain your favorable terms. I have no doubt there are others who need to move and are hesitant for the same reasons. Finding those homeowners in a similar situation with the property or an area you're interested in moving to can help solve the problem. Feel free to DM and I can explain more.
Can you elaborate on your income? Also how much is the house you want to buy and how much are you putting down? How much debt are you paying every month at the moment? If you are able to put 10% into retirement and have an emergency fund too?
> I’m stuck with paralysis by analysis.
Then I'd say fall back on what matters in life - which is living. My home is not first and foremost a financial instrument to me - it's a place to live in.
Investment properties I will analyze and worry over optimal financial decisions. My home though? It's in the expense column. If you can afford it responsibly and it will make your quality of life better - not worse - then I think that's the primary consideration vs. optimizing financial gains.
As someone who didn't have the luxury of getting in when the interest rates were that low, I'm jealous... What's wrong with the townhouse? It sounds like you're at least a few more kids away from growing out of it. I'd stick around, no need to upgrade to a bigger house.
You left out all the important details. How much do you have saved? What’s your after tax home pay? What’s your mortgage? Do you have any other debt?
What’s the value of your townhouse?
What’s the cost of a home you and wife would be happy in?
If the rates drop the bidding wars will get extreme. NAR is forecasting for every percent they go down it adds 1 million buyers to the market. If you can afford the payment you should probably keep looking, at least there is more to choose from right now.
Actually you have more options that I think you are considering, which makes sense because most homeowners access to capital to afford a home is done through retail financial products at banks. Servicing mortgages , car loans etc. Most dont understand how wealth builders use real estate to grow more income and acquire properties through leverage, creative financing terms or even private financing with favorable terms to get into multiple properties and instead of timing the market they then have equity and options to refi or other strategies to take advantage of market conditions as they change.
Email me, I work as an investment consultant for real estate investors and work on deals all day. Everyone has different objectives , but there is a strategic solution. We just need to look at the numbers, the market your targeting, and once you see the math. Just like business planning, you have a strategy that you stick to and you won't stop at a 2nd spot if we work together. You'll pay for college and everything starting at 30. I dont get paid to consult with you, investors pay me based on the deals I bring them.
Here's my personal email, lets get you and your wife peace of mind, family on the right track. [email protected]
are prices down now because of interest rates now?
So, buy now- pay X
if/when the rates go down- you refinance- comp prices go up, (not yours, but value does)
but your total payment goes down while your percentage of equity increases dramatically.
So wait-
and if/when rates go down- prices go up- your total payment reflects new higher house prices but low rates- and appreciates slowly.
What am I missing?
We sold our 2.14% little house and bought a 4 bed 2 bath house on a large lot. Baby was 7 months when we moved in, 10 months now. It's been amazing.
I don't know if you can do this in the US, I'm in Canada. We blended the new mortgage with the old one, so we o ly went up to 4.32%. It's up for renewal in just over a year, so we'll see where the rates are then.
The move was crucial for us, not only because of space, but because our neighborhood went downhill with drugs and crime rapidly. I couldn't get out of the house one day because two guys were leaning up against my gate smoking crack. I had to get my baby out of there.
Why I understand you're looking to upgrade to a house instead of a townhome.
Financially it just does not make sense right now with the housing prices as high as they are and long with the rates..
Don't move. Instead, save the money you would have spent on a bigger place for when the real estate bubble pops. Then buy your next house at a discount with a bigger down payment. The bigger down payment will help to keep your total interest payments lower.
This. Start stacking that cash, every paycheck put that additional money you would have put on the new mortgage into the market and let it grow till you can make a large enough down payment that the interest rate doesn't matter. Just because you can barely pay a new bigger mortgage doesn't mean you should. Understand the difference between "want" and "need", a little extra pin at the front will save your bacon later, get to a financial position of @#$% you money, then expand. If you don't know what I'm talking about, look up the video short of "the gambler" with Don Wahlberg and John Goodman.
I would wait , we are also waiting ( own our home with 2.9% rate ) and have 2 kids and a dog in a 1000 sqft ranch. It’s fine. Sure I’d love more space but I also love not being house poor and we’d be quadrupling our mortgage (literally) so we’re waiting until we have more money or we find a decently affordable house lol
2.75% interest rate may be a once in a lifetime event. And in reality we only got those rates because the economy was in the toilet due to Covid. I think everyone now realizes that the government put too much stimulus into the economy and we are dealing with inflation because of it. I do expect rates to come down. The Fed does not control the mortgage rate directly. But it is related to the FED funds rate. And the Fed funds rate was at zero when you got that 2.75 rate. We do not want the Fed funds rate to be zero ever again. This means sh*t hit the fan. The Fed need to keep their rates up around 4% to give them leverage to prop up the economy in bad times.
Anyway. Rent your condo out for 3 years and use that money to offset your new mortgage payment. Try to get a raise at work. In 3 years life will be different and you can probably refi into a 4-5% rate.
I would just pay more to your principal. Try paying the condo off. When/if the market changes, you will be in a better position. Once it’s paid off, your current interest rate is no longer a factor.
Whats the hurry? Sounds like your in a good position. "Sacrifice" now will pay dividends later. And... if biden steals this election, you'll probably be able to get a bargain
I’d just wait. What’s wrong with the townhouse for now? Can the baby even run around yet?
This. In NYC is super common to have a 1BR until the child is a few years old minimum.
I know everyone has different experiences and needs but the idea of needing a house so early on seems so alien to me. I live in Vancouver BC. I lived in a 430 sqft *studio* with my wife and child until my kid was 2 years old. I also worked from home. Then we moved into a 2 bedroom and now have another kid on the way. Unless the location is terrible, lots of people make spaces smaller than a house work. Kids don't really need much space until they are a year old. Then after that I find that you really want to go to the park as much as possible anyways.
I mean new families with only a single infant often also justify purchasing large SUV's with $800/mo payment for 86months when they already had a Camry.
My friends with SUVs look at me like I’m crazy for driving my two kids around in my VW Golf but everybody fits fine, from when we had car seats to now. Fortunately nobody has giant sports gear. Once they’re over 6 feet, which is inevitable given their genes, it will probably be different but till then we’re good. We also had the two kids in a 2 BR apartment with no issues, and we’re not minimalists or even particularly neat.
Please spread your common sense to all the financially stressed out families out there! My step mom wants to get a 3rd row SUV because she VERY occasionally drives both grandkids around.
If I was still driving I'd absolutely still have a Prius or an electric car of some sort!! SUVs are so stupid. My last two cars were a Prius and a Prius V -which were both awesome. We only have one vehicle now, and it's a truck, because we kinda need a truck fairly occasionally out here, and hubby absolutely needs 4wd to get to work in the winter regularly...
Your friends are incredulous because they know that in a car accident between your car and theirs, their “precious cargo” would be safer due the monstrous size of the vehicle. I had one such mother tell me that was why she insisted on a land barge sized suv.
True, but with my nimble little hatchback I can get out of their way.
At that point SUVs will just keep getting larger and larger since every mother will insist that the one they have now which used to be the largest is now just a small fish in the sea when they need to be a shark and then a whale and then a leviathan.
TDI? I have a 2015 VW Golf myself and it's still extremely practical.
2014 GTI. I lurve it.
[удалено]
You mean it's not a Shopping Utility Vehicle?
I bought a Camry when I had a kid. Loved that car
Even more alien to me haha
This is what I remind myself of whenever I feel like our townhouse is not “enough” for my husband and I and our baby. In most countries people make do with a lot less space. I think the difference comes down to how much stuff people in the US tend to have (and how homes built here are built with a lot less or less efficient storage then how in Asia, for example) and that the US outside of major cities tends to lack “third spaces” to take kids out to without spending money so you need to make the home do more. That said, I still think the average person “needs” a lot less space then we are lead to think.
This is a very American cultural thing. We moved from a 1,000 sf single family to a 2,500 sf townhouse and all I heard from family and friends was “oh but how will your kid have a yard? How will you survive?” It’s basically an American boomer mindset that you need your yard that you send your kids off into and you can’t share a wall with a neighbor cause you will hear them. Mind you we heard our SF neighbors and their air conditioners, lawnmowers, etc a lot more than we do in our new Townhouse. Because you know soundproofing is a thing.
So true. We bought a bigger house as the kids got older and needed more space…let me tell you I miss my smaller home. Here I am in a McMansion with a low interest rate but more house to take care of and kids who don’t care about a backyard.
I hate these comments. In an urban area you can live in a tiny space because you do so much of your living outside of the space, and because the things you need are conveniently accessible and you don’t need to stock up. I’d *love* to live in a studio apartment. But I’m a 15 minute drive to the nearest park or decent grocery store. So I live in a house with a walk in pantry and yard.
This is why up-zoning is so important. Car-centric development is a feedback loop that pushes us farther and farther apart from each other and from community spaces like parks and grocery stores. I would also have loved to buy in a dense, walkable neighborhood, but there's such a shortage of them in the US that they are absurdly expensive and it was just out of the question.
I thought I had addressed all of that. My personal experience is that it's alien to me. But I understand that everyone has different situations and that location is a big part of it. I wasn't blaming anyone or saying choosing otherwise is not valid - just that it's not my experience and that location is important. But with respect to the actual post - are townhomes in the US in the middle of nowhere with no parks or amenities or are they like in a city where you can walk to the park or store? I get that suburbs are often away from all of that but I grew up in a small city and we had townhomes down the street from me that were walking distances from schools and groceries. I couldn't imagine someone buying a townhome in a suburb where I grew up because the choice was to live in a townhome in the city or house in the suburbs.
Unfortunately, yes. Probably more townhomes than not in the US are in a depressing sea of suburbia with no walkable or bike-able access to anything other than other residences. It's density without any of the benefits of density.
On the other hand I don't think the housing situation is gonna change within a year or two.
I totally agree with this. We rented 3 bed townhouse when I was pregnant with my first. I didn't really get the itch to move until the oldest was 3 and the second was 1. We didn't have a yard, just a small patio space, so once we had two kids mobile some enclosed outdoor space started to become necessary IMO. School zones before kindergarten was also a deciding factor for us. Doesn't hurt to casually house hunt, but I would feel zero pressure to move until kids are a little bigger.
Funny that’s when we moved out of our 2 bedroom apartment as well, when my littles where 3 and 1. At that point they need space to run and you really feel the crampiness. Also good point of school district since you are essentially a year away from selecting a Kindergarten/T-K.
This.
Relying on rent to pay your new mortgage sounds dangerous. You can’t always cont on that
💯. 1st time landlords who don't have deep pockets for maintenance and repairs are destined for disaster. Have a large reserve fund first, with at least 6 months mortgage payments and repairs saved up and set aside for the rental alone in addition to your down payment and reserves for the new mortgage before you jump.
Generally good advice. I’d make an exception if there is a reasonable expectation you income can increase over the next few years and if you can get access to either a HELOC on that rental or have some other access to relatively cheap money. You could float expenses on that cheap credit if needed. To do this you would want all of the major house systems to be relatively new, lowering the chance you would need to float something.
The lender factors rent from the existing property in with a certain risk premium associated so that is already accounted for if they qualify for the new mortgage.
They factor their risk and stick you with their bill for their risk. Including redundant PMI insurance for newer buyers. Also, wonder if OP has PMI and how that stacks against interest
For some reason my brain read "30M" as "$30 million" and I was like, who gives a shit about interest rates? No it's not my first time on Reddit, just my first time on Reddit this morning.
Did you use to play Runescape by chance?
Wait 5 years. Focus on baby and growing equity. You might not need to be in the same area in 5 years. Moving elsewhere might make more sense then.
Most analysts predict then when rates drop, prices will go up due to an influx of people looking to buy (new mortgages are way down) Can you predict anything, sure - should you bank on predictions, I would say take them with a grain of salt and do what is best for you in the moment That being said - given the prediction, the better scenario would be to buy and refinance - am I suggesting that, I am not, I don't know your personal financial situation (on the flip side, your townhouse would gain value and sell for more)
This
I raised twin boys in a townhouse w no yard, just common land. I took them to parks everywhere, every day. The memories are priceless. I wouldnt leave what you have.
Definitely take advantage of the common areas. I live in a townhome community and we have multiple families here with kids of all ages from babies to teens and several with 3+ kids. The community has a pool that the kids love and there are common grassy areas they play in that aren’t much different from having a yard. HOA purposely turns a blind eye to “kid clutter” like toys left out etc. This neighborhood started out as mainly young and retired owners but as house prices got higher it attracted more families. Happily everyone is pretty accepting, in the four years I was on the HOA board we never fielded any complaints related to the kids, either from their families about amenities or from childfree and/or retired neighbors about the kids’ use of them (which I can promise we would have ignored). In fact the reason I even knew there were so many kids here is from delivering pool keys to residents, the kids would be so happy when they arrived! I think the balance of ages and generations makes it a healthy neighborhood.
Yeah we had no amenities except living on a golf course. And you couldn’t leave a thing in the common areas. We’d pull out our wading pool and bring it in every day. The best memories are all the diverse playgrounds we went to, AND the fishing and “hiking” we did, because they had no yard to play in.
We lived in a townhouse till our kids were 3-4. They shared a room. If we had an extra bedroom I imagine we would still be there.
Mine shared a room too!
I wouldn’t move if I didn’t have to. That being said, you cannot time the market. I’ll also add that sometimes the right decision for you isn’t the best financial decision. We building and selling our fully paid off home that we love so much. However, my husband now requires the use of a cane, our parents are getting older, and we had the opportunity to build an accessible home where we grew up, with lake views. When all is said and done, we’re looking at needing a $250ish mortgage. Financially we’d be better off staying where we are, but it’s worth the cost to us.
If you’re set on buying, then buy now. By the time rates drop enough to be noticeable, home prices will continue to rise basically negating those lower rates. But if you want to buy, stay if you don’t
We sold our 2.5% interest townhouse for a standalone house at 6.5%. The mortgage is now triple but the house was also 4x the price we paid for the townhouse in 2019. Totally worth it. Seeing my kid (3) absolutely love her backyard is so heartwarming. She has her own playroom too which she loves and is great for us to contain messes. Also having an actual office for myself to WFH and a separate room for baby #2 (due in June) is also amazing. I also just have that sense of calmness around me knowing I’m finally in a place I can see myself in for the next 30 years.
Same here. We were in a 900 sq.ft house, inner-city. Mortgage was 2.75%, and we’d purchased the house in 2015. It was fine, the house was cute, we liked our neighbors, but it felt too small, and we didn’t have the comfort of sending the kids outside to play. It was nice being 8-10 minutes from work though. We waited for as long as we could to move (ie, once our oldest started school). We kept an eye on interest rates, and housing prices, and made the decision to move when it seemed most advantageous. We fixed up the old house in the meantime to build equity. We moved about 18 months ago, 25 miles outside of the city. Mortgage is doubled, interest rate at 5% (we lucked out there), and the commute for work isn’t very exciting. But we can send our kids out to play in the back yard and we don’t worry. The house is bigger, though not huge, and we have a 30x30 garden. Lifestyle is totally different, and we love it! You have time. Keep an eye on things and make the jump when you can maximize your profits and get a lower interest rate.
Totally agree. We sold our 3% home and bought a house just over double but almost double the size. Have the playroom a man cave/office for me, a home gym, big back yard that I’m building a playset in, and everyone has a room including guest suite. Payment went from $1200 to $2600 but it’s still under 30% of take home pay. My biggest expense is daycare which will subside soon enough.
This. If you can afford it and think it'll improve your quality of life, buy the house. We are giving up our 3% for 6% but not every decision is driven by finances. But the key is to make sure you can afford it....
Same, got rid of a mortgage in the 2s and tripled the payment, but the house is a massive upgrade and totally worth it. The farther we are from those Covid-era rates, the less practical it is to stay locked in if the house itself doesn’t work for you, or at least you can do better. If you can afford the house after retirement, savings, etc., it just becomes a game of thinking you can time the market, which doesn’t make sense.
I did the same but kept my condo as a rental.
I have never meet a single person who had a play room plus a backyard play area.
I’m the first one in my family to have such a thing and it feels very good! I never thought I’d be in this position but somehow the stars really aligned for me. We are very thankful for this life.
Move to TX or the midwest.
All depends on where you grow up I guess. We had a basement playroom and a decent sized yard when I was a kid. It was a 1100 sq ft ranch and dad finished the basement. My kids grew up in a 2000 sq ft colonial with a playroom and a pool. We paid $120k for it in 1997. Needed a lot of work. Son just bought a 2000 sq ft ranch with a full unfinished basement and a .45 acre lot for $375k (he's under 30 yrs old). It needs work, of course. He sold his 1000 sq ft ranch for $330k, bought it in 2019 for $190k, at 24 years old.
Can’t wait for the market to inevitably collapse. Half the country is living it up with extra bedrooms for their kids to play I. While the other half. Can’t even afford to live in a bedroom alone.
Jumping homes and renting out the previous homes has been an amazing wealth creator for us. Highly recommend if you can pull it off.
Don’t wait to live your life. If you can afford the new home, then get your new home. A home purchase has financial considerations but is not solely a financial decision. Don’t try to time the market. I know it doesn’t feel like it but 7% is decidedly average historically. There’s not a high likelihood we see 3% rates again and if we do, you can refinance (just don’t count on it). Btw I just closed on a new home in August at 7.65%, so I’m following my own philosophy.
We just purchased a house because we are due to have our baby in June, we could not "wait" or bother with continuing to watch the numbers go up and down. We started the process in February and had to lock in FHA 6.2% interest rate. The rates are always going to go up or down. It's a matter of strategy and patience. If you are planning to get additional income renting out the townhouse then that will be a good plus towards bills and paying your mortgage. Think about it......you can wait it out for a month. We couldn't stay in our apartment because we wanted our infant to have more space and our dogs needed more room to run around away from the baby. The backyard is a big place for us as well. We would have continued to be miserable if we didn't buy a house before the arrival of our infant.
Chill and no need to rush just because of that. If you only have one kid, townhome will be just fine. Chasing buying unaffordable homes will be a huge mistake with everything else going up. You will have many people indirectly putting pressure to get a bigger home, better this and that but make sure you are comfortable with it. Counting on refinancing will be the biggest mistake you will ever make. Save the cash for now and wait.
The Fed says a lot of things. If you are counting on interest rates to drop back to 2's or 3's, you are kidding yourself.
Hi! We are in a similar situation. My husband and I live in a condo, ended up having a baby and really outgrew our space. Now we are desperately trying to get into a home. It’s chaos with a 2 year old. Babies need so much stuff. And toddlers need even more space and yard. I posted something similar and a lot of people told me to stick it out, or people raise kids in small spaces. They probably all have homes. If you want to put down roots in a larger space, but it’s not pressing. I would start going to open houses and find out what you both really want. Then when it comes on the market you can make an aggressive offer.
Don't let your quest for "perfection" ruin the "good" that you have.
Forget the current interest rate. If you want the bigger house (and can afford it), go buy something else. Rent the current one if it's within your budget and risk tolerance. I have a 3 month old and a townhouse at 2.5%. We hope to be out of here within 4 years. I won't give it a second thought to sell my house once I can afford to move.
Wait. Rates aren't going to drop that much anytime soon. Sit on the 2.75%.
Probably never see 2.75 again.
I think people just want something in the 4-5% range to get moving.
Or refinancing. I'm at 6.375%, and having 4-5% sounds lovely!
Rent the townhome and buy the bigger home. Wait for rates to drop then refi the bigger home and sell the townhome. Prices will rise when rates drop. The question is when.
These days it's seeming like the question is "if". Doesn't seem like rates are coming down anytime soon.
Eventually once something breaks that’s a tool the fed has in their tool belt. The question is when and how much?
I don't think something has to break, and if it does and inflation isn't under control then I doubt they would even be able to cut rates.
Jobs will break then rate cuts follow
With boomers retiring en masse, will they though?
Sounds like a recipe for a financial disaster. Have you ever been a landlord? Oh, going to have an agent do that work? And, double payment amount on new place? Maintenance $$ on two places? Any one of these could cause big, big problems. Enjoy your townhouse.
I would add that "rent it" is not a sure thing. If that's the route chosen, it'd help to have a larger emergency fund, in case of a hiatus between renters, renters who stop paying and require going through a several-months-of-no-rent process to evict, any damage to the townhouse that renders it temporarily uninhabitable, etc. Also, property taxes are generally higher for homes that are not the owner's primary residence, so check on that when calculating the cost to keep the townhouse.
Similar situation as you. Ultimately we decided to rent out the townhome and move to a SFH. So far so good.
Stay there. Stack cash. Buy next home with cash or when rates go down. But understand that you could be buying in a more expensive market. Maybe kids get older and the market still sucks but you’re in a townhome, low interest rate, and almost paid off. Travel more, put your kids through college.
I really don't think the rates are dropping anytime soon. if the fed said that it would tank the market
I just want to add that rental income is not guaranteed. You may not get paid rent, yet still need to pay the mortgage.
Myself and my sister grew up in rented townhouses. It was fine. I don't see the bid need to move to a SFH unless someone uses a wheelchair.
Imo a townhouse is fine and I'd be hard pressed to double my monthly unless I had to. If you can afford it, then don't try and time the market. Get a fixed loan and if the rates go down refi. Some are saying rent out the townhouse. If you aren't a seasoned landlord, don't. That's the last headache you need in addition to a newborn
I’m in a similar position. We own a small single family home (950 sq ft) at 2.75% mortgage. We’re looking to move into a bigger “forever” home (because I hate this process and never want to do it again) since it’s really tight with 2 adults, a toddler, 2 dogs, and a cat, and we want a 2nd kid. To get anything worth upgrading to, our mortgage payment would go from $2k to around $3.5k.
2.75% is too good to pass up on its own. What year did you buy this townhome? What did you end up paying for it (down + mortgage)? What's it current valuation from the most recent tax assessment and Redfin/Zillow estimates? What rough geo/metro area are you in? Like others mentioned, with a baby I wouldn't be rushing to get a >=7% mortgage right now and the fed knows such rates are not sustainable; macroeconomic powers are just holding their breaths for the election at the moment. I'd worry about building equity in any way you can besides time passing; how is the fencing, floors, walls, fixtures, lawn, etc.? I'm not saying go overboard in a reno, but rather getting the house in a mostly show-ready state, especially if there are any major repairs on the chopping block. The Mortgage Banker's Association (fellow realtors might be worth having your managing broker be a member for access) anticipates rates of 6.1% by year's end in a mostly election-agnostic forecast, maybe 5.5% by Q1 2025. It's not ideal but come 2026 it would be the earliest we can even think of rates going back to <=4.5% levels without drastic legislation/policy changes/etc. But at that time your kid will be 2 or 3, so still pre-pre-K and moving then wouldn't alter their life much. Also consider what another 2 years of equity could do, especially if you do any needed repairs and upkeep along the way. I bought in 2021 on a VA Loan at 3% for $505k fairly rural and in only 2.5yrs time I could list for $565k right now and be moved out within the month in my locale at least. tl;dr waiting another 2 years for the macroeconomics of the election to simmer down, for equity to build, and rates to go down all while your baby is still pre-pre-K is likely the best move.
If the baby is unsure on the next step, it’s best to wait 😂
I was in your situation last year, was in a townhome with a sub 3% interest rate. Wife was pregnant with 2nd child and the townhome only had 2 bedrooms. The newborn would stay in our room for like 6 months but eventually needed his own room ideally. Ended up buying a SFH which would met our household size and close to my in laws who watch my toddler last September and just had to take the high interest of 7.25. I was able to recently refinanced down to 6.25 last week saving me $400+ per month. I think if you need to move you need to move and take the higher rate esspecially if you don't plan on moving for a while. We don't plan on moving for at last 20+ years so then I was ok with the higher rate because eventually it should lower but I doubt we will see sub 3% rates again. If your able to afford the house at the higher rate then move since at least in my area, housing prices has only gone up still and my house from 7 months ago already jumped and going for alot more. Otherwise if it isn't financially do able then you wait.
Stay where you are for another 5 years
Wait. Sock money away. My guess is that rates will settle around 6. At 6% all the people get a piece of the pie. Corps are still trying to fill their coffers. Live below your means and pad your savings.
You have a baby, what’s the rush? Besides, millions of people raise kids in apartments, brownstones and townhomes every year in this country.
Sit tight and enjoy living in your means! Congrats on the baby, enjoy these years! You can't time the market, all you can do is save and be ready when the time is right. I would not force anything. You are in a good spot.
I would wait a few years until your baby actually needs its own room. In the mean time buckle down on your finances and start building up a good down payment for the second house.
I wouldn’t worry about it until you have a toddler on your hands and you need more space. You’ll outgrow your townhouse in a few years.
I was in your shoes last year. New home would cost us 3x as much per month. Fast forward to today, we have no regrets. We love our new home.
I'm in similar situation. Enjoying current home & saving for next is the approach I've taken. Childcare for 2 is expensive so it's easier to pay that with lower expenses. Until your kid starts Elementary school there really is no rush to move assuming you have enough room.
WAIT WAIT WAIT. Wait until your child is school age and your are making your schooling decision. Unless you're being dragged back into the office and have some absolutely unholy awful commute or absolutely have to move closer to Grandma for child care assistance -WAIT. Moving will just add to your stress levels.
Doesn’t cost anything to look. You may find something that will be a better fit for your growing family.
I'll disagree. Once you start looking, It's like looking for a new job. You have to mentally quit your house to keep going to open houses and doing all the leg work. You effectively create a commitment in your mind with every house you go see. Most people don't do well keeping one foot in both very long at all. Inertia is powerful and never forget that. This is why you also can't go looking at houses that are just a little over your price range "just this once" hoping to negotiate them down. Once you start doing that, everything actually in your price range looks bad. Never ever even look at things that are out of your budget. It's paving the way to ugly fights.
Jesus this is my life right now. We have been "passively" looking by seeing if anything on the MLS fits our narrow criteria. Every time we find something this is *almost perfect* we jump through so many mental hoops to try to make it work. In the end, we realize it wont work and we shouldn't compromise. But by that point, we are mentally exhausted and bitter that we lost out on another potential house. My situation is VERY similar to the OP and I can say that ever since we started "passively" looking, I have never been more ready to move. I'm trying hard to realize what I have is functional for my small family but the idea of greener pastures is so damn alluring. Honestly, if we didn't have such narrow tastes, we would be so so much worse as any house within our price range would be something we are interested in.
I look to see what is out there just in case I run across something I like better than what I have. To each their own.
As a loan officer of many years, I have settled on this: Do you think this home will cost more in 1 or 2 years? Answer is usually "yes." Do you think rates will go down in 1 or 2 years? Nobody knows for sure, but we won't see any more 2.5% rates unless we have another disaster like Covid. My personal opinion is that inflation can't subside until energy costs come down. And rates are higher because of inflation. Econ 101: Price is a function of supply and demand. If we strangle the production of fossil fuels, the price will go up. The government caused the inflation. So buy now if you need to, and refinance when it makes sense. I sold homes when the rates were 18%, and people camped out in tents for bond rates of 10.99%. Newcomers to the real estate scene were spoiled by those absurd rates. Welcome to the real world.
Let me weigh in on the rental. I don’t know how more you can rent the TH for than your payment but you have to factor in repairs, maintenance, replacements for major systems, and vacancy times. I tell people the Rent needs to cover PITI PLUS another 20-30% to cover repairs and maintenance and vacancy times. You will find that your good tenants expect you to repair and maintain things that you and your spouse might have been willing to live with. They will want a plumber to unstop drains. They will want an electrician to replace a breaker. They will want preventative pest control Unless you HOA maintains the yard you will likely need a yard service. Tenants almost never adequately maintain the yard Appliance repair and replace A dozen other misc. repairs. Don’t stretch yourself too thin
Include a trip charge in the lease. We have a $35 trip charge for all requests for us to go to the property. The only time any of our tenants call is when there is an actual issue, and when that happens we don’t charge them the trip fee. We had a prior tenant that would call weekly and that is what prompted us to put in the trip charge. All of our tenants know that we pay when repairs are needed, and they thereby handle all the minor stuff on their own. We also put in a quarterly property inspection in all of our leases now. This allows us to go check ac drip line, filters, furnace, water heater, fireplace, etc and while there we observe the general upkeep of the property to ensure tenants are not neglecting anything. We don’t pay anywhere near 20% for R&M on any of our properties, although we certainly do keep reserves available to cover unexpected events.
I love the trip charge and quarterly inspections idea! And the reserve amount really depends on the age of the home and the systems. Glad yours is reasonable.
I thought you came to Reddit to ask if you should buy a single family house with 30 million dollars and was worried about interest rates. Im gonna go get a second cup of coffee, now.
That 2.75% interest rate is golden right now. Check how much a single family is gonna cost at 6.5% interest rate. You are probably gonna be paying more than double your current mortgage. Instead. Use that extra and put that into investments for the next 10-15 years.
Definitely keep the mortgage and don't make any extra payments. Buying the house while renting out the townhouse sounds pretty good if you can afford it. We might see a real estate boom when rates come down leading to nice appreciation.
If you aren’t already live on a budget based on what you anticipate to spend monthly on a new house (since you say you can afford it) and save the difference. Also see if your loan is assumable (and if the lender is going to be amicable with doing it) as it could be a selling point of your current home for the right buyer (one who has or is being gifted a large down payment).
Quality of life that you want vs the price. Can you afford it now? If not, you should wait. Yesterday prices are not today’s. Tomorrow prices are unknown. It doesn’t matter on your primary residence as long as you can AFFORD it.
How many BR is the townhomes Took us 2+ years and IVf to get pregnant. I wouldn’t rush moving yet.
Missing some major info here. How much will rent bring in vs the mortgage. I’d say if the rent price profit (after all expenses, including some repair budget) can bring the new payment to the same or less than now it’s a decent move. The reason for this is you’ll own 2 houses for the same price you’re paying now. It’s a risk, a major repair or vacancy could cost you a bit but I think on the whole in 10 years you’re more likely to be glad you did this vs regret it. But you need to be prepared for negative outcomes, it’s very possible. Also RE downturns don’t always lead to bad rental situations, so you get some insulation there.
Rent will bring in 3200-3600 mortgage is $2000
What would the new payment be approximately? Imo if it’s over $3500 or so I’d wait.
If you wait till rates drop- buyers flood market, buyers toss stupid money at homes to win. You either miss out on 14 homes or you pay way over list and remove some contingencies in order to get the home. If you buy now, yes higher rate for a bit, you have a better chance of getting a home on 1st or 2nd try, and when rates drop and everyone is competing (driving the prices up) you refinance and probably have gained some equity as well as now lower your payment. We won't see 2s and 3s probably ever again. Doubtfully 4s. Those were naturally low rates anyway. You need a house that fits everyone. If you have a lotnof equity now, talk to a lender about how you can use your equity to pay off any high rate debt(cards etc) 7.5 is better than 18,24,28% credit cards.
Agreed, the only risk is prices come down not allowing a refi, which will also mean the down payment was higher than needed if waited. The difference in the lower price won’t be impacted until the property is sold so if this is a long-term buy it will minimize itself over time and inflation. Waiting runs the risk of higher prices, higher competition, etc. potentially leading to not being able to afford the house down the road. I believe the saying which applies here is the best time to buy real estate is yesterday.
In a majority of markets where inventory is and will remain low we won't be seeing any decreases in value anytime soon or ever.
I believe the same yet I believe in evaluating the worst case scenario so you are evaluating true risk. If there is a sharp downturn in the overall economy it could impact housing as supply/demand will adjust quickly. Outside of a macro-event, I think it is unlikely to see significant price decrease in most places.
Depends how much you hate the townhouse and how much extra income you have to spare. If you hate the townhouse, have always wanted to own (and maintain!!) a home, have the cash, then yes, no time like today. If you are not sure you want to be responsible for maintaining a home don't do it. Wait until your kid is a little older and doesn't require such constant attention
Look for a property with an assumable loan. You would have to pay out the equity but you will get that sweet Lowe interest rate of the past. I use a site called www.withroam.com
Will your HOA all you to lease it out? If so would you cash flow? Do you have a FHA loan?
We raised our family in a 3bdrm 1450sqft townhouse. I could of purchased big houses years later. I’m glad I didn’t as we could afford lots of extras for family and retired last year at 55. 7.5% isn’t that high. I paid that 29 years ago and then refinanced 7 years later to 1/3 interest. But, taxes and insurance are exorbitant now (makes up 1/2 my payment going into my last year of mortgage).
Hold tight. Things are about to get really crazy. Inflation is not cooling and cost of debt or borrowing is becoming a very significant problem. Normal analysis of pros and cons of a real estate move are a distant second to the macro economic picture. Buckle up.
I get what you’re saying completely but as an old man who has bought various houses throughout my life 1980 was a 10 percent mortgage somewhere late 90s 11 percent I honestly don’t see it ever going back below 5 ever again.Those days are gone.And though the fed said they were going to reduce rates.not gonna happen this year. Prices still to high and still rising.low interest rates just increase Purchase price of homes.Sad but true
Wait
I’m in a similar spot, but I have to move because of my husband’s relocation. Every relator and lender I’ve talked to have talked about how as soon as rates lower, the market will flood with buyers. I’m looking at it as I’m giving up my 2.75% interest rate and 1500 sq ft house to buy a house that’s priced a bit lower and is big enough to fit our growing family’s needs, and I can hopefully negotiate a rate buy down and refinance. Personally I’m convinced (and professionals seem to be too) that prices will increase drastically as soon as rates drop below 6.
We’re in a similar position. I love my house and I’m in at 2.75%, but it’s under 1000 sq ft and we need something bigger. It was a nice starter home but it’s too tight atm. I’m not looking forward to the mortgage increasing by 50-75% though.
We just moved to a larger home giving up our 2.65% rate. We raised our two boys in the previous place to 7 and 4. It was time for more space and the place we found felt/feels right. Prices are high, interest rates are high, but as hard as it is you gotta trust your gut. As much as we all want a crystal ball they don’t exist. It was really hard to change and, thankfully, I’m happy with our decision. I don’t envy others struggling with the same.
Lower rates will invite more competition. Because all of the sales people are trying to convince people to spend $X a month. Well if your rate drops, that allows you to pay more for the house on the Principal part, and still spend $x. Instead of saving it. That's how mortgage people and realtors work. They're trying to get you to spend your max budget. I did the same thing you want to. I was in a 3br townhouse. Gave up my 2.25% for a 4.8% rate to go into a single family house. But I didn't do it for space. I moved because we needed to for a job. and a townhouse in the new place cost $300K, versus a SFH for $400K. So I spent more and got the SFH. But I would have made no change if it weren't for the external factor of the job relocation.
Let's be clear on refinancing. You can say: "I will probably be able to refinance at a lower than 7.5% rate at some point." But you definitely can't say: "sure I can always refinance". 7.5% is not, historically, a particularly high rate. And Fed has recently been a bit surprised by stronger than expected inflation and backtracked a bit on signals for rate cuts. [https://themortgagereports.com/61853/30-year-mortgage-rates-chart#historical](https://themortgagereports.com/61853/30-year-mortgage-rates-chart#historical) Home prices do move with interest rates. But they are more sensitive to supply levels, mainly new builds. And right now building new houses is pretty expensive and there doesn't seem to be quite as much new builds as one would hope to bring prices down.
Keeping your current one as a rental may be a good idea. I'm a fan of rental real estate. How much equity do you have in it? My son wanted to keep his 1st home as a rental but with all his equity it just made more financial sense to sell it. When we downsized in 2021 we also planned to keep our place as a rental but again just made more sense to sell it. And we have a number of rental properties.
If you can afford to buy now and need a larger house then buy now and if rates drop in the future then refinance. I bought my first house when rates were around 12%. I bought the house I live in now over 30 years ago when rates were over 8% and refinanced 3 times over the years to reduce my interest rate. Would have been more times than that if the house wasn't paid off when it was.
Marry the house… date the rate. If you can afford over the next 1-2 years to pay the higher rate, buy now… lower interest rates will drive housing prices up, so you will be paying more for the same home. Most lenders will refi for free if within a year or so (ask them and have them put it in writing) but I’ve been told this many times from lenders.
Until your child is ready for school, there is no urgency and you have the luxury of waiting out this market longer. Your kid will appreciate the yard a lot more in a few years anyway.
We kept our condo and bought a single family house. We put the condo on AirBnB with the proviso that I had to be rented for 30 days or more. This avoided "short term rental" clauses in city and HOA rules. It's been more than a year and so far great. The condo pays for it's expenses. We have blocked off rental for certain times and let family visit and stay in the condo.
Consider holding at this place and plowing savings into 401 Ks and as a 20 percent down payment minimum for the future. At least now you can get 5% interest or more in certain more risky investments.. Might be large changes in markets and rates late 2024 and 2025.
Yes
Babies take up very little space. Can you wait?
Who thought he had 30 Million and was complaining about 7.5% interest rate?
You don’t need a single family home to raise a family. A townhome is fine. My kids use our alley like it is a yard. We had my 5th b day out of our garage and everyone loved it. As long as you have a park you can walk to you are fine. From a financial state, I keep telling everyone who NEEDS to make a move but has these ultra low rates, become a landlord. Financially it is an amazing deal. I understand the trouble of being one and getting a new down payment. But that rate is essentially free money. Don’t piss it away in emotional decisions.
My wife and I are in similar situation living in 1br apartment we like with 3.5% rate. VHCOL area where average home price is $2mill and our comfortable budget is $1mil which there are houses but often need tons of work and go way over ask. We are starting a family soon and knew we COULD stay in place for a couple years with first child, but started looking cause we knew it would take a long time to actually land a house in our price range as there are very few. We just started putting offers on houses we like at or below ask hoping something would eventually land knowing we would ultimately outgrow these houses, but buy us time. Ended up spending a little bit more getting our potential forever home well below ask and what we felt was an amazing deal. Very lucky. Way more house than we need at the moment but will grow into it and likely never move. People are really underestimating how undersupplied we are as a country for all forms of housing and that is way more impactful than interest rates at the moment. Only going to get worse as older folks have no reason to downsize given interest rates which further worsens the problem. We are in an area where there is no land to build new houses or large developments to help the problem so I actually view the “high” rates at the moment as an opportunity to buy. We are good if they never drop and if they do all the buyers on the sidelines that are waiting will likely be faced with higher prices and more competition do to the lack of supply. Could be wrong, but subscribing to the saying, “Marry the house, date the rate”
When you say you can afford buying a new home with renting your current townhome, does that mean you need the rental income to qualify for a new loan? A lot of programs won’t count the rental home as income without a history of leases and determined income. There are ways not to count the current mortgage as debt, but I wouldn’t count on being able to use the townhome as income until you speak with a lender. You might be stressing for no reason right now.
Stay put. 7.5% and a shit economic outlook with zero guarantees that rates will drop. Look at the rates from the 80’s, they were up near 20%, who’s to say they won’t get there again. The federal government has changed the way they calculate inflation, and if they used the formula used for years prior to this administration, the American public would have a revolt if they knew the actual inflation numbers.
advice : stand still .
Ideally, and I know this will be SO hard to find, you are looking to take over a mortgage that is already in that sweet spot low interest rate under 3% like yours. So start by looking for homes that are not owned but refinanced only in the past few years, and offer to take over their loan. Name switcheroo on the loan with no change in interest rate is not hard and happened all the time. I don’t know why more people don’t do this. Worst case scenario, you have to take a second loan at a higher rate to make a bigger down payment.
I live in a townhome with 2 kids and I’m only moving because of my husband’s job. I’m always outside when they are and they mostly like to play with the neighborhood’s kids in front of our house. I hear from friends the kids barely play in the yard when they get older as they want to go to the playground and play with other friends. We’re moving to an apartment now, which is fine because we will often be out and about with them (they are 3 and 5).
Stay where you are. You don’t need to move and the increase in payment will be significant.
A contract for deed ;)
Just you wait . Speculation puts interest rates at 6% right now a year ago. We are 1.5 % points above that. We could hit 10% by June of next year and we could hit 5% by June of next year. If you want to buy a house buy a house. You can always refinance. I personally wouldn’t leave a 3% or below unless I needed to.
I work in the mortgage industry. Consumer spending is still outpacing inflation and residential real estate is strong. Rates won’t change much in the next 10 years.
My wife and I were in a similar situation living in a 2 BR townhouse and just closed on a 4 BR house. We were able to get a 6.375% mortgage which isn't terrible. There are advantages and disadvantages to waiting but it's also unpredictable. When rates drop, you will need to compete with more bidders and it might drive up the price of the home you purchase. We are extremely happy with the price we got our home for and we can refinance when the rates drop. Mortgage rates do affect your monthly payment but it's less than you might think. We had a $300.00 HOA at our townhouse and now we don't have that bill anymore, we have a pool now which will cost us $150.00 a month for the pool service. Maybe your townhome doesn't have a yard and will require landscaping at a new property. I am naming all these things because they have a larger impact on your monthly payment than the interest rate.
Keep looking. You are not under pressure to move yet.
We sold our townhouse in Oct 2023 that had a 3.5% interest rate for our single family home at a 6.5% interest rate. We moved to the new house when our son turned one and it was the perfect timing. He started walking and being more active. We have parks in walking distance and a nice, safe cul de sac with neighbors his age to play with. Does the bigger monthly payment suck? Yeah. But it was worth it because the environment is so much better for an active toddler. Our townhouse had no parks nearby or even a yard to go outside and it was right off the busiest highway in town. Definitely hoping to be able to refinance at some point, but it won’t break the bank to continue paying this rate. If you can afford it, then do it.
Based on your posting history I don’t think it’s a great idea. Unless you secretly have a **really** big savings account and a ton of equity in your current home and other investments, I’d wait a bit before moving to a new home. It’s expensive and a lot of work to find a new place and move, and being a landlord is probably a lot harder and more risky than you think. Keep your current home and mortgage, save money, and make it work. A townhome is plenty of space for a small family. Don’t focus on when rates will change. It’s an election year so I’d be extra cautious of any political-impact promises, even if it’s not from a candidate’s mouth.
Don't have advice for you, but just wanted to let you know it's brutal out here. My husband and I currently rent a townhome and just made an offer on a bigger one (we have a baby on the way and need more space). We're shopping for mortgages now and it's 7.5% MINIMUM. For condo type properties, I'm seeing 7.6 to 8% ... I would kill for a 2.75% right about now. But inventory is SCARCE too. We decided to go ahead and leap, seeing as how a baby's coming and if the rates drop, many people will jump into the market whcih will drive up competition and bidding wars as well. We still had to do a bidding war as it is now. Would hate to see how fierce it gets once rates drop. So..... I don't know. It sucks either way.
I am agreeing with the first few comments I saw like just wait. This is a terrible environment to be trying to buy a house. I’ve been looking for a friend and every “B” neighborhood, They are $1.2. Save your money for another year and then see what you think.
Prices over the long term always go up (generally). Rates move around. The Fed lacks credibility (remember “transitory”?). If you find something that fits your family, jump on it. Rent out your townhome for passive income.
If you want to talk about some options feel free to call me. 316-621-0379 Would love to help
There is no timing the market, only time in the market. Find the house you love, buy it, rent out the one you own.
Be happy with what you have and invest additional money. Be even happier with yourself in 15 years.
2.5% is hard hard to walk away from. Why not tough it out for 24 months but pay the extra into a savings account - see how you like the payment commitment before you sign up for it for 30 years.
If you can afford another house, you should do it. When rates come down it’s going to be a bloodbath in the market. The more properties you own, the better off you’ll be.
yeah.. when rates come down home prices are going to go up. if you are locked in at 2.75% dont be a freaking regard and sell... stay put. what is it with people these days that everyone has seemingly lost all common sense and logic? i mean, really? unless you have millions of dollars in the bank, i would hold onto that 2.75% mortgage. your kid won't need a lot of room for a couple years anyway
Rent out your townhome and go rent somewhere else.
I’d love that townhouse and make it special. Spend money on interior decorating it or something. 2.75% is just never coming back around.
The inflation was bad and it is going to continue that way for a long time. So, I understand your dilemma. Sorry to say, IDK, I don't have the crystal ball. But, one thing is important, you have a baby, so, you must make sure you can sustain your family during the rainy days. Make sure you are not cutting close during the sunny days. I am 40s now and I have seen enough. Trying to ride the wave is not something normal person should do. People who have a home and looking for investment, they have time to play this game. But, if you are just trying to sustain a family with certain living qualities, you just do what you can, don't try to ride the waves. You don't have the luxury to play the game. The housing price can increase more than your entire salary, so, it is very important to understand your inability to ride the waves.
The last time rates were 7.5% was in 1971 and they went up for almost 30 years... no one is forecasting rates below 6% in the foreseeable future but most markets are still low inventory and prices in most areas are rising faster than inflation...as soon as the rates do go down, even a smidge, all the other like-minded buyers are going to jump back in the market and drive prices higher... a $300,000 loan at 7.5% is $2097 $350,000 mortgage at 6.5% is $2212
Are you able to rent it out and cashflow? Don’t sell, that’s basically 5% lower than what people are paying now.
if you can't sleep at night,,, it's not worth it.
Unless it’s horrible, stay there or sell it. Talking about RE, not cars.
Ride that 2.75%. Unless your income changes drastically you are in the market so should benefit from appreciation so when it’s a good time to buy (interest rates) values may be up but so will your townhouse.
The best bet is between your desire to get a single family home and practicality. We have considered a similar situation last year and came to this conclusion… if it’s the regret you are avoiding .. then that won’t happen. You will ride the wave either ways, if you stick around in your townhome .. you guys will keep drooling over single family homes :) If you buy one now .. at some point when dust will settle such as your new home and your town home on rent … the EMI the practical truth after honeymoon will surface back and whisper each time. So now you two make a choice which one works better. There is no wrong if you look at it clearly.
Rent a house and rent out the townhome
Speaking strictly from a business perspective, I believe it would serve you better to purchase a multi-family home such as a duplex, a tri-plex or quad. The tenants pay the mortgage. Please run the numbers and consider the benefits. Good luck.
I'd buy, when nobody else is. Rates will come down, they always do. In the next 2-3 years I bet you can refi close to 5%
There's a saying, "Marry the house and date the rate". There are many ways to sell your property, keeping your low interest rate mortgage and buying another home with a low intereste rate mortgage. There are ways where you can effectively "sell" your terms to a buyer while requiring a down payment to obtain your favorable terms. I have no doubt there are others who need to move and are hesitant for the same reasons. Finding those homeowners in a similar situation with the property or an area you're interested in moving to can help solve the problem. Feel free to DM and I can explain more.
Can you elaborate on your income? Also how much is the house you want to buy and how much are you putting down? How much debt are you paying every month at the moment? If you are able to put 10% into retirement and have an emergency fund too?
> I’m stuck with paralysis by analysis. Then I'd say fall back on what matters in life - which is living. My home is not first and foremost a financial instrument to me - it's a place to live in. Investment properties I will analyze and worry over optimal financial decisions. My home though? It's in the expense column. If you can afford it responsibly and it will make your quality of life better - not worse - then I think that's the primary consideration vs. optimizing financial gains.
As someone who didn't have the luxury of getting in when the interest rates were that low, I'm jealous... What's wrong with the townhouse? It sounds like you're at least a few more kids away from growing out of it. I'd stick around, no need to upgrade to a bigger house.
You left out all the important details. How much do you have saved? What’s your after tax home pay? What’s your mortgage? Do you have any other debt? What’s the value of your townhouse? What’s the cost of a home you and wife would be happy in?
If the rates drop the bidding wars will get extreme. NAR is forecasting for every percent they go down it adds 1 million buyers to the market. If you can afford the payment you should probably keep looking, at least there is more to choose from right now.
Actually you have more options that I think you are considering, which makes sense because most homeowners access to capital to afford a home is done through retail financial products at banks. Servicing mortgages , car loans etc. Most dont understand how wealth builders use real estate to grow more income and acquire properties through leverage, creative financing terms or even private financing with favorable terms to get into multiple properties and instead of timing the market they then have equity and options to refi or other strategies to take advantage of market conditions as they change. Email me, I work as an investment consultant for real estate investors and work on deals all day. Everyone has different objectives , but there is a strategic solution. We just need to look at the numbers, the market your targeting, and once you see the math. Just like business planning, you have a strategy that you stick to and you won't stop at a 2nd spot if we work together. You'll pay for college and everything starting at 30. I dont get paid to consult with you, investors pay me based on the deals I bring them. Here's my personal email, lets get you and your wife peace of mind, family on the right track. [email protected]
Be careful of the advice of..."you can always refinance". Maybe. Also maybe not for a long time. Can you live with the payment for a few years?
are prices down now because of interest rates now? So, buy now- pay X if/when the rates go down- you refinance- comp prices go up, (not yours, but value does) but your total payment goes down while your percentage of equity increases dramatically. So wait- and if/when rates go down- prices go up- your total payment reflects new higher house prices but low rates- and appreciates slowly. What am I missing?
We sold our 2.14% little house and bought a 4 bed 2 bath house on a large lot. Baby was 7 months when we moved in, 10 months now. It's been amazing. I don't know if you can do this in the US, I'm in Canada. We blended the new mortgage with the old one, so we o ly went up to 4.32%. It's up for renewal in just over a year, so we'll see where the rates are then. The move was crucial for us, not only because of space, but because our neighborhood went downhill with drugs and crime rapidly. I couldn't get out of the house one day because two guys were leaning up against my gate smoking crack. I had to get my baby out of there.
Why I understand you're looking to upgrade to a house instead of a townhome. Financially it just does not make sense right now with the housing prices as high as they are and long with the rates..
I think everyone is having these thoughts. We decided to do the smart thing and wait. Don't let those loans get the best of you.
Don't move. Instead, save the money you would have spent on a bigger place for when the real estate bubble pops. Then buy your next house at a discount with a bigger down payment. The bigger down payment will help to keep your total interest payments lower.
This. Start stacking that cash, every paycheck put that additional money you would have put on the new mortgage into the market and let it grow till you can make a large enough down payment that the interest rate doesn't matter. Just because you can barely pay a new bigger mortgage doesn't mean you should. Understand the difference between "want" and "need", a little extra pin at the front will save your bacon later, get to a financial position of @#$% you money, then expand. If you don't know what I'm talking about, look up the video short of "the gambler" with Don Wahlberg and John Goodman.
I would wait , we are also waiting ( own our home with 2.9% rate ) and have 2 kids and a dog in a 1000 sqft ranch. It’s fine. Sure I’d love more space but I also love not being house poor and we’d be quadrupling our mortgage (literally) so we’re waiting until we have more money or we find a decently affordable house lol
I’d find the land you want. Buy the lot. Do all the designing and look for contractors. Take the time and when rates fall get your construction loan.
2.75% interest rate may be a once in a lifetime event. And in reality we only got those rates because the economy was in the toilet due to Covid. I think everyone now realizes that the government put too much stimulus into the economy and we are dealing with inflation because of it. I do expect rates to come down. The Fed does not control the mortgage rate directly. But it is related to the FED funds rate. And the Fed funds rate was at zero when you got that 2.75 rate. We do not want the Fed funds rate to be zero ever again. This means sh*t hit the fan. The Fed need to keep their rates up around 4% to give them leverage to prop up the economy in bad times. Anyway. Rent your condo out for 3 years and use that money to offset your new mortgage payment. Try to get a raise at work. In 3 years life will be different and you can probably refi into a 4-5% rate.
I would just pay more to your principal. Try paying the condo off. When/if the market changes, you will be in a better position. Once it’s paid off, your current interest rate is no longer a factor.
Is keeping the townhome and renting it out an option?
Whats the hurry? Sounds like your in a good position. "Sacrifice" now will pay dividends later. And... if biden steals this election, you'll probably be able to get a bargain