We recently had a really productive conversation with a family, and I thought it might resonate with some of you.
Situation:
A couple in their mid-50s, Johnny and June, felt stuck in their current home. While June works from home, Johnny has been trying to balance a 90-minute work commute. The couple is ready to make a move (closer to Johnny’s work), but they have felt completely “stuck” because their current mortgage is attached to an amazing 2.125% interest rate! They’re facing three choices with the house:
- Stay put and tolerate the commute.
- Sell the house and cash in on the equity (healthy six figures).
- Rent it out.
Rent projections would cover the mortgage, taxes, and HOAs. However, any additional expenses/maintenance would be out of pocket. That said, they’d be able to hold onto ownership of the home as an asset and participate in any future home appreciation. Note: Johnny and June were upfront that they didn’t want to be landlords or hire a property management company.
Next:
It’s really common for families to think about this decision in a vacuum: “My current mortgage payment is $x,xxx, my future mortgage payment would be $y,yyy!” 🤯 These mortgage handcuffs are tough; you want to move, you know it’s the right thing to do for you and your family, but the original mortgage rate keeps you anchored to the home. The idea of accepting a healthy 4-figure increase in your monthly expenses isn’t an easy pill to swallow.
My advice:
First, let’s take a step back—decisions of this magnitude should be in the context of their overall financial plan. Let’s start here: Could they afford it? Yes, they have saved and invested incredibly well and have close to $2M put away as their nest egg. Johnny and June also have a growth investment mindset and want to continue to invest aggressively for the long term to fund a 30+ year retirement with the potential for a rising income stream to have as much fun as possible. Okay, so they can afford the move—does it align with their goals?
- Retire and move to Barbados in five years.
- Spend more time together as a couple.
Here’s how I consulted them: Sell your house. Invest the proceeds for long-term growth. View your new home as nothing more than your rental. Don’t stress about the 90-minute commute anymore; enjoy more time together. When you do retire, sell the house and move to Barbados. The mortgage rate doesn’t matter in the grand scheme of your most cherished goals. The home is affordable and puts zero strain on their budget.
Conclusion:
Enjoy the sun! Keep your eyes fixed upon the goal and use the plan as the guide. If you or someone you’re close to could use help aligning their finances and establishing a financial plan, please reach out to us. We’re accepting new clients and eager to help.
Cheers,
Nic
