Keep Your Low Mortgage Rate or Sell? Do the Math First

If you have a mortgage in the 2s or 3s, you're sitting on something valuable, and you know it. Maybe that's why you've been stuck. The house stopped fitting a while ago, but the idea of trading a 3 percent loan for a 6 percent one feels like lighting money on fire.

Sometimes it is. Sometimes it isn't. I spent more than 20 years in mortgage and financial technology, so I'd rather show you the numbers than hand you an opinion. Once you see what the rate is actually worth, the decision gets a lot clearer, even if the answer is "stay."

What Your Rate Is Actually Worth

Take round numbers. You owe $265,000 on a 30-year loan at 3.0 percent (you borrowed about $300,000 originally), and your principal and interest payment is $1,265. If you had to borrow that same $265,000 today at an assumed 6.5 percent, the payment would be about $1,675. That's roughly $410 more every month for the same balance.

Payment is only part of the story. The cleaner measure is interest. In the first year, you'd pay about $7,800 in interest on the 3 percent loan and about $17,100 on the 6.5 percent loan. The gap is roughly $9,300 a year, and it shrinks only slowly. Over five years, that's somewhere around $45,000.

That number is your rate premium. It's what you pay each year for the privilege of starting over. The rates in this example are assumptions, not quotes, so use current numbers and your actual balance when you run yours.

What the Move Itself Costs

The rate premium comes on top of what it costs to move at all. If you sell a $450,000 house, total selling costs commonly run around 7 percent once you count commission, Pennsylvania transfer tax (typically 2 percent total, split between buyer and seller by custom), title fees, and repairs. That's about $31,500. Buying the next house adds closing costs and moving expenses, which on a $575,000 purchase can easily add another $19,000 or so.

So the round trip costs roughly $51,000 before you've paid a dime of the higher interest. I walk through the full side-by-side in my page on refinancing, renovating, or moving.

The Break-Even Question

Add it up. About $51,000 to move, plus about $9,300 a year in extra interest. If you stay in the next house for five years, the cost of giving up your rate and making the move is somewhere near $95,000. These numbers vary a lot from one household to the next, but they're the right order of magnitude.

The real question is whether what you're getting is worth that. A better location, a house that fits, a job that requires it, a floor plan that works: any of those might be. "I'm a little tired of the kitchen" probably isn't, and in that case a renovation does the job for far less. Costs only matter next to benefits, and staying put isn't free either if you hate where you live.

When the Math Says Move Anyway

A few situations tip it the other way.

The move is forced. A job relocation, a divorce, or a house that needs a big roof or systems job in the next year or two changes the comparison, because staying has its own price tag.

You're moving to a much smaller loan. If you're selling a house with lots of equity and buying something cheaper, your new mortgage is a lot smaller than your old one, so the rate premium applies to a smaller balance. Plenty of people find that a modest new loan at 6.5 percent hurts a lot less than they expected.

The house is the problem. If the issue is the lot, the street, the commute, or the layout, no amount of renovation money fixes it. Spending $100,000 to keep a 3 percent rate on a house you dislike isn't a win.

Ways to Keep the Rate and Still Move

Rent out your current house. You keep the 3 percent loan and collect rent while you buy the next place. It's a real strategy, and I own rental houses in Ridley and across Delco, so I'll be honest that it comes with work: tenants, repairs, vacancies, and in many Delaware County municipalities a rental license and inspection. Lenders generally want to see a lease and some equity in the house before they'll count rent toward your next loan. Talk to a loan officer before you commit.

Borrow against the old house for the down payment. A home equity loan or HELOC on your current house can fund the down payment on the next one without touching your first mortgage. It adds a second payment, so it only works if the budget holds up.

Find an assumable loan. FHA, VA, and USDA loans can generally be assumed by a qualified buyer, which means your low rate can become a selling point. Conventional loans cannot. The catch is that the buyer has to come up with the difference between your sale price and your balance, and assumptions take longer than a normal closing. If you have a VA loan, your entitlement stays tied up in the old loan unless the buyer is a veteran who substitutes theirs.

Stay and renovate. If the problem is the house and not the location, there may be a better way to fix it than moving. I covered that in the page I mentioned above.

One Asymmetry Worth Remembering

You can't get your old rate back once it's gone. But you aren't married to the new one. If rates fall in a few years, you can refinance the new loan. You can also negotiate at purchase for a seller credit or a rate buydown to soften the first couple of years. A 3 percent loan, once paid off by a sale, is gone for good. A 6.5 percent loan is a loan you may be able to replace later. That doesn't change the math above, but it should take some of the fear out of a move you actually need to make.

Frequently Asked Questions

Can I take my mortgage with me to my next house?

No. A conventional mortgage is tied to the property, and it gets paid off when you sell. The only way to pass a loan along is through an assumption, and that only works with FHA, VA, or USDA loans.

Should I wait for rates to drop before I sell?

I wouldn't plan around a rate forecast, because nobody has a reliable one. Plan around what you need. If the reason to move is strong, waiting costs you something every year. If it's weak, you probably aren't moving anyway.

Will buyers pay more for a house with an assumable loan?

Some will, but it's a narrow group. The buyer needs enough cash or a second loan to cover the gap, and the lender has to approve the assumption. It's worth knowing if you have an FHA or VA loan, and I'd want to look at your numbers before counting on it.

Is renting out my house a good idea?

It can be, if the rent covers the mortgage, taxes, insurance, and repairs with room to spare, and you're willing to be a landlord. Check your township's rental license rules, talk to your lender, and run the math before you decide.

How do I find out what my house would sell for?

Start with our home valuation page or check recent sales near you using the market report search. I'm happy to talk through the numbers with no pressure to list.

Want Me to Run Your Numbers?

Send me your balance, your rate, and what you'd like to change about where you live. I'll lay out what staying, renovating, renting, and selling each cost you, and tell you which way it leans. Get in touch and we'll go through it together. You can also see what your house is worth on the home valuation page, or browse the Delaware County community guide if you're weighing a move.

Figures above are illustrations using assumed rates and round numbers. They are not loan offers or quotes, and actual rates, fees, and qualification vary by lender and borrower. I'm a real estate agent, not a loan officer or tax advisor.

Ben Hill
Licensed Real Estate Agent in Pennsylvania and Delaware | Premier Property Sales and Rentals | 192 Saxer Avenue, Springfield, PA 19064 | 484-442-0295