Should you downsize, upsize, or refinance?

Posted by Mike Brown Group on Friday, December 1st, 2017 at 2:13pm.

You got to let me know, should I stay or should I go? – The Clash
Should you upsize, downsize, or rightsize (by staying put)? Many consumers are currently struggling with this very big decision. Right now, the Treasure Valley housing market is a constant topic of media analysis and speculation. Everyone has an opinion on it, and many are contemplating what this means for them. In October of 2017, the median house price of a home in our area topped $266,000. This shows a 13% gain from statistics from early 2017 when the median home price in January was $235,000! It’s no wonder the housing market is triggering conversations and contemplation.
Most loans that were underwater because of the Great Recession now show strong positive equity. Selling an asset with an increase in value makes financial sense, but only if you’re ready to make a change. There are pros and cons that must be carefully weighed−and historically low-interest rates can certainly impact your decision. Does refinancing to increase your cash flow or to change your 30-year mortgage into a 15-year mortgage make sense for your situation, or should you make a move?
Downsizing considerations
Are you ready for a smaller home? Selling your current home makes financial sense if you’re ready to live in less space with less maintenance, lower utility bills, and (potentially) lower property taxes. Generally, less square footage usually costs less than your current (larger) home. If you are near retirement, using the equity you currently have can help you reduce or possibly eliminate your mortgage payment, allowing you to achieve additional financial goals.

It’s important to be aware that we are in a very fast moving market for less expensive homes. In the Treasure Valley, competition for smaller homes can be intense, with buyers experiencing multiple offer situations and bidding wars on properties fitting this criteria. Right now, there is a 1.6 month supply of houses on the market (a 0 to 4 month supply favors sellers). If you are considering making a housing change, you need to prepare yourself for current market conditions. If you are downsizing with considerable equity from a larger home, your most favorable position is to have your agent assist you in writing an offer with a very large down payment. You might also want to consider building a smaller new construction home so that you can seamlessly transition from your larger home to your new smaller home within certain and specific timelines and without consumer competition.
Upsizing considerations
Have your circumstances changed and now you’re dreaming about upgrading from a cramped 3-bedroom to a 4-bedroom with a bonus room? Is your pantry overflowing and are you looking for creative storage solutions around your home? Or, maybe you’re now working from home and don’t have a place to comfortably and quietly complete your projects? If you have positive equity in your current home and you're looking for more room, upsizing might be right up your alley. With current low-interest rates and with positive equity, you can take the equity you have and get the home of your dreams without breaking the bank. 

Rightsize considerations (refinancing)
If you want to stay put because you're happy right where you are, it’s important to consider that if you have a 30-year mortgage and you’re at or close to the 15-year mark it might not make sense to refinance unless you're saving more than a point and a half in your interest rate. Although, if your home has increased in value since you took out your mortgage or refinanced your mortgage, it is possible you can eliminate PMI (private mortgage insurance) from your payment. This would require you to have 20 percent equity in your home. Those who have an adjustable rate mortgage should absolutely consider refinancing into a fixed-rate product, which will give you peace of mind that your payments will not significantly change. Refinancing your current home loan will cost you fees that you may not recoup, so it’s important to talk to a lending institution or your CPA to ensure that you’re making a good choice. 
No matter what stage of life you're in, our experienced agents can help guide you through your options, helping you with making informed decisions. Give us a call! We're always happy to help in any capacity. 

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