I’m 36 and locked in a 3% mortgage on my $400,000 home, but I need more space as my family grows. Should I stay put and make it work, or is upgrading worth the financial hit?

Possible reasons to stay put

One of the most obvious reasons to stay where you are is the financial hit you’ll take.

Say you’re locked in at a 3% mortgage for a $400,000 home. Assuming you made a 20% down payment for a 30-year mortgage, your monthly payments hover around $1,345.

If you decide to upgrade your home, you’ll no longer be able to get this mortgage rate, as the average 30-year fixed mortgage rate now sits around 6.83%.

Even if you upgraded to a home of the same purchase price, your mortgage payments would increase to more than $2,000.

But if you want to accommodate a growing family, it could mean your home will need to be bigger, hence a higher purchase price. So if you end up purchasing a home for say, $500,000 in exchange for an extra bedroom and a larger yard, that monthly payment would rise substantially to around $2,500.

None of this includes other costs, like closing fees, paying a moving company and a potential commission to your real estate agent. It also doesn’t account for market price increases.

Even if you’re able to reasonably afford a new, higher mortgage payment and the associated costs, there are other opportunity costs involved. The money you could save by staying put could be used towards other expenses or financial goals.

Maybe your family wants to keep going on their annual vacation to Hawaii, or you’re hoping to put more money towards your retirement accounts. A higher mortgage payment could prevent you from doing all that.

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When to consider upgrading

Despite the potential to save by staying in your current home, there are times when it may make sense to move.

Needing more space and making sure your family lives comfortably can be absolutely worth it. You may also be facing other lifestyle changes, such as accepting a big job promotion, but your new office is too far away for you to commute where you currently live.

When thinking through your decision, consider what it is that makes your family truly happy and whether moving to a new home fits into this vision.

Does your family really need a new home to get more space, or can you renovate so that the home flows better? Do you need a neighborhood that has more family-friendly amenities? Do you have a good understanding of the time and effort it’ll take to maintain a larger home?

If you’re leaning towards upgrading, be sure to calculate how your new housing costs will fit into your budget. Aside from property taxes and insurance, be sure to think about how you’ll afford ongoing maintenance for your new home, too.