"You Make Money on the Way In": The Case for Moving Up Now, and When It Doesn't Work

There's an old real estate saying worth writing down:

You make money on the way in. You get a check on the way out.

The two big variables when you buy are the purchase price and the payment. Let's concede something right away: if you have a 3% mortgage, your payment will almost certainly be better if you stay put.

So why would anyone move up now?

You may be further ahead than you feel

Lots of owners feel stuck. But compare yourself with someone who doesn't own a home and is shopping for the same house you want.

If you've owned for a while, you may have $100,000, $250,000 or $500,000 of equity. That's a down payment you didn't have to scrape out of your checking account. You just lived there and made your payments.

If you sell and roll that equity forward, your loan amount may stay fairly similar even as you move into a higher-priced home. What you're mainly absorbing is the higher rate.

The case for moving now

Here's the argument:

• Use the current lull. With demand softer, you may be able to negotiate on the home you really want.
• Get the home that fits. That might mean the school district, the yard or the tree-lined street you couldn't get the first time.
• Set your purchase price. Your price doesn't change after you buy, even if the market rises.
• Change your payment later, if you can. If rates fall and you qualify, you may be able to refinance.

What has to be true

This strategy is a bet, and you should know what it depends on:

• You can comfortably afford the higher payment today. Don't buy based on a future refinance.
• You plan to stay for the long term. Time helps absorb market swings and transaction costs.
• You believe in San Diego over the long run. Home values can still fall.
• You accept that rates may not drop when you'd like, and that refinancing has costs and qualifying rules.

When staying makes more sense

The trade-up has to be worth it. If you'd be paying one and a half or two times as much for a home that's only a little nicer, with a slightly better commute, staying may be the smart move.

A low-rate mortgage is a valuable asset. Giving it up should come with a big reason.

Get the numbers before you decide

You don't have to move, and you don't have to decide today. Just sit down and work out what a move would actually look like: your equity, your new payment, your backup plan, and what you'd be gaining.

Then you can make the choice with real numbers instead of fear or hype.

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Want to see what your move would look like? Talk to our team.

Related reading: Keep and Buy vs. Sell and Buy · House Rich, Move Poor

Disclaimer: Educational purposes only. The GreenHouse Group Inc. (CA DRE #01859042 | NMLS #366847). We are real estate and mortgage professionals, not CPAs, tax advisors or attorneys. This content reflects our opinion and is not individualized real estate, financial, tax, legal or lending advice. Home values and interest rates can rise or fall, and no future appreciation, rate drop or refinance is guaranteed. Consult qualified professionals about your situation.