‘It just seems wasteful’: I bought a 3,000-square-foot house at a 3% interest rate. It’s too big. Do I sell?

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Dear Big Move, 

I’m a 29-year-old woman who purchased my home in a small town in Illinois two years ago. I was shocked at the time to even qualify as I am the first homeowner in my family. I went big, and the house is 3,000 square feet. I make six figures, and can afford the home. My mortgage is $1,200 a month with a 3% interest rate. 

It’s just me and the house feels so huge for one person, and the upkeep is a lot of money. I don’t have a family or friends nearby, so it just seems wasteful. I also don’t have anyone to show my home off to. I want to sell, and buy a small condo. However, everyone is telling me not to because of interest rates. Thoughts?

Single and Stressed

The Big Move’ is a MarketWatch column looking at the ins and outs of real estate, from navigating the search for a new home to applying for a mortgage.

Do you have a question about buying or selling a home? Do you want to know where your next move should be? Email Aarthi Swaminathan at [email protected].

Dear Single,

You’re very lucky to have found a big-sized home for $1,200 a month, with a rate of 3%? That’s amazing, given that rates are now over 7%.

Even though the home may be too big for you now, if you have kids and need more space, it could be the perfect place. Or if you have aging parents and have the need to keep them close by, the house could also serve as a perfect home for you. Overall, you have a ton of options as to what to do with the big house down the line, so there are a few good reasons for you to keep it.

But you feel that it’s too much house for one person. You could rent the home and make money off of the property, before selling. Or you could rent a room in the home. Selling in order to rent is not ideal, and swapping a 3% interest rate for a rate that’s more than twice that is even less ideal, even for a smaller property. A higher portion of your payments will go towards paying off that interest, if you do.

Renting lets you keep your home, that ultra-low mortgage, and also allows you to have a tenant who can help you cover the cost of upkeep, maintenance, and so on. Being a landlord is tough work, and some tenants can be tricky to deal with, so consider working with a professional property management firm to help you. They will run the necessary background checks to help you screen potential tenants.

Renting lets you keep your home, that ultra-low mortgage, and also allows you to have a tenant who can help you cover the cost of upkeep, maintenance, and so on.

If you are unable to find long-term renters, what about short-term? Is your home in an area that attracts tourists? Are you close to a university? You could rent a room on Airbnb
ABNB,
-1.50%
or another similar platform. 

Plus, with so little available properties on the market, it will be a challenge to find something good at that price point. You not only have a ton of competition, you’re also going to be borrowing at that 7%-plus rate. 

Your house is too big, but what happens if you feel like your condo is too small, and you miss having a backyard? Being happy or unhappy is not dependent on the size of your house, it’s how you feel about yourself. Make an effort to turn your house into a home by hosting a book group, or having new friends over for dinner. Even if you host an event once or twice a month, it might help change your perspective.

Owning a large-sized home is not necessarily “wasteful” as it’s an asset like any other. You just happen to live in it. Even if you can’t show it off, in a couple of years’ time you can show off how much the home’s appreciated, and hence your net worth. That will give you more options — even a smaller townhouse in a more sociable neighborhood — in the long run. Think carefully before you sell.

This week’s Big Move question was spotted on Reddit.

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