You may have caught a recent New York Times article that discussed the phenomena known as “Golden Handcuffs”.
We’ve talked about it before on our blog…in brief - buyers who were lucky to find a home when mortgage interest rates ran under 3% are now grappling with a much different landscape. Today’s 30 year mortgage hovers around 6.5% and presents a hurdle for some would-be homebuyers and homesellers as they feel “stuck”.
We wanted to continue from where that NYT article left off. While the article astutely identifies the issue, it doesn’t do much for problem-solving. And we at MAJ are nothing if not problem-solvers.
“I need a bigger/different home but I feel stuck. What are my options?”
We hear this all the time. And after about 2.5 years of living in a 6.5% interest rate world, we offer you the Four C’s to solve the Golden Handcuffs blues:
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Creative financing. For those of you worried about jumping from a 3% to a 6.5% interest rate…there are innovative loan products that can bring that interest rate down. Our clients have worked with specific banks who offer high-net worth clients a lower rate, they have worked with lenders for a rate buy-down option, and they have qualified for special programs based on the location of the home. There may be a way to make borrowing money easier, and the best way to start exploring options is to be in touch with a great lender (we are happy to introduce you).
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Consider renting. If your home doesn’t work for you because it’s the wrong size/shape/layout/location, you may have the option to hold onto it at a lower interest rate and become cash-positive by turning it into a rental. There are a lot of considerations involved in becoming a landlord, but if the benefits outweigh the drawbacks you could find yourself with a great tenant that helps offset the cost of your next move. Renting your first home could give you the freedom to buy a second home that works for you, or rent a second home that fits your needs. All the while, your first home is building equity via appreciation.
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Construction, construction, construction! For some of you, the change you need is possible in the home you have. Living through a renovation to add a bathroom, change up the kitchen, or build an ADU in the backyard is no picnic - but living in a house that doesn’t meet your needs is also a drag. If your home is almost perfect but just needs a tweak, consulting with an architect or designer to see what’s possible to make your life work could be a prudent move.
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Call a Realtor. It may be time for a little myth-busting…call a Realtor (ahem, us) to better understand how people move from House A to House B. While it’s not for the faint of heart, all of our clients who moved from their first house to their forever house look back and say “I’m so glad we did it”. Even if the only thing you gain is a house that works for you (the layout, the location, the size)…it could be worth it!
As always, consult with a financial planner and tax advisor on your next big move. An unbiased and steady coach is priceless and will give you the confidence you need to become “unstuck”.
As always, we are here for you and yours! Think of us when you need advising, we’re happy to help.
