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Rate lock dilemma: Renovate or relocate when rates are high?

What we'll cover

  • The mortgage rate lock-in effect

  • Pros and cons of renovating

  • Considerations of relocating

When it comes to mortgage rates, the housing market has experienced highs and lows in recent years, dipping as low as 2.65% in early 2021 and skyrocketing to upward of 7% in 2023. These drastic changes have resulted in a mortgage rate “lock-in effect," a situation where existing homeowners aren't motivated to sell their homes because they would likely give up their current low mortgage interest rate for a higher one.

If your home isn't serving your current needs, you might be thinking about renovating or moving. If you're wrestling with this decision, consider these factors.

Going the renovation route

Making renovations to a home can be an expensive undertaking, but depending on the situation, it could be the right choice. Some of the most important things to consider:

  • What kind of renovations do you want?

  • How big and costly will a renovation be?

  • How much time would the renovation take?

  • Is the project worth holding onto your mortgage?

Renovation pros

In a high interest rate environment, likely the biggest benefit of holding onto your property and renovating is maintaining your rate. While renovations could be a large upfront expense, taking on a higher rate could add tens of thousands of dollars onto the total cost of your loan.

Other pros include being able to personalize your living space to make it exactly what you want. You may also be able to enhance the value of your property through strategic upgrades , especially if you renovate your kitchen and bathrooms. If you're curious about how you could potentially increase your home's value, make an account with ComeHome for property insights.

Renovation cons

Home projects, big or small, can be pricey . Whether you work with a contractor or DIY, something unexpected could occur to drive the total price up. It's important to be aware of the upfront costs of renovating and whether you're in the financial position to take it on.

Renovations can also be inconvenient — putting limitations on your space and the livability of your house. For example, if you're making a major addition, you might not be able to live in certain rooms during construction. Or if you're gutting your kitchen, you may need to prepare for several weeks of takeout.

While moving may involve a higher interest rate in the short term, you could potentially refinance at a lower rate in the future.

Packing up and moving out

No matter what the housing market looks like, moving is a big decision with layers of considerations. Be sure to think through:

  • Why you want to move

  • What a new home could offer

  • What you might leave behind

Relocating pros

One argument for moving? You can find a house that fits you, instead of trying to force something to work. If you need more space to accommodate a growing family , new working situations or simply extra storage, it might make more sense to buy than build onto what you have.

Relocating can also be an opportunity to:

  • Move closer to family or friends

  • Live somewhere with a lower cost of living

  • Move to a preferred neighborhood

For some, these benefits are worth a higher mortgage rate.

Relocating cons

Selling and buying a home involves closing costs , plus moving costs . You'll also need to think through the logistical challenges of moving, which can be more difficult if you're relocating to a new area and have to figure out jobs, schools and more.

And lastly, moving isn't just transactional — it's important to acknowledge it can be an emotional and stressful undertaking.

To stay or go?

It may be tempting to renovate instead of relocating, but fixing up your house comes with a number of costs. And while moving may involve a higher interest rate in the short term, you could potentially refinance at a lower rate in the future. At the end of the day, moving or staying in your current home is a highly personal and circumstantial decision and there is no right or wrong choice. Look at your finances to understand what would be best for you.

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