Should I sell my house with a low interest rate? The short answer is that it depends on why you want to move. A low rate is worth protecting, but it shouldn’t be the only thing keeping you in a home that no longer fits your life.

The average rate on existing mortgages in the U.S. is about 4.4%, according to Federal Housing Finance Agency data reported by U.S. News, so a lot of homeowners are sitting on a rate well below today’s market. If you’re in Long Beach, Los Angeles, Orange County, or Oceanside and thinking about a move, there are ways to soften the higher-rate hit, including assumable loans and rate buydowns. You can also run your own numbers for free at LivingCAHomeCalculator.com.

Should I Sell My House With a Low Interest Rate? Start With What Changed

When someone sells while sitting on a great rate, there’s almost always something else going on. A divorce. A job change. Financial pressure. Or the big one, the house just doesn’t fit their life anymore. The rate is one piece of the decision, not the whole thing.

Should I Sell My House With a Low Interest Rate If I Need More Space?

Picture a household that bought a two-bedroom when it was just two people. Now there are five people sharing that space, and it’s bursting at the seams. A 3% rate is nice, but it doesn’t add a bedroom.

Upgrading can also work out better than people expect. A lot of times, homes that have been on the market for a while are the ones where you have room to negotiate, so you may get more house for your money than you’d think.

When You Have More House Than You Need

Now flip it around. Maybe your household is smaller than it used to be, and the extra bedrooms, the yard, or the pool feel like more than you need. That’s what we call downsizing, and it’s about gaining as much as it’s about letting go: less upkeep, more freedom, and often some equity in your pocket. My downsizing service is built around exactly that kind of move.

Let’s say your home is worth a million dollars and you have a 3% rate. Yes, rates are higher now, but you might be buying something that costs a lot less, like a one or two bedroom condo, a two bedroom single family home, or a townhome with less to maintain. In Long Beach, that could even mean luxury condo living at Aqua Towers.

Downsizing doesn’t always mean fewer bedrooms, either. I’ve had clients buy a house with a pool and then realize they never use it. They’re paying a pool service and looking at water they aren’t swimming in. Meanwhile, plenty of buyers would love a home with a pool. Trading it for something with less upkeep is its own kind of downsizing.

Run Your Numbers Before You Decide

This is where the decision moves from emotional to practical. A higher rate on a smaller or less expensive home can still work out, especially once you factor in the equity you’ve built. The only way to know is to run your own numbers instead of relying on a rule of thumb.

Start by finding out what your home is worth. I offer a free home valuation based on recent comparable sales, with no pressure to list. Then plug your numbers into the free calculators at LivingCAHomeCalculator.com. You can see how much you might qualify for, or what your proceeds could look like if you sell. There’s no login, and it doesn’t ask for any of your information.

If you want to know what the market looks like for the home you’d buy next, I break it down in Is Now a Good Time to Buy a Home? It’s also smart to talk with a CPA about how a sale could affect your taxes, and my homeowner tax tips are a good starting point for the questions to ask.

Two Ways to Bridge the Rate Gap

If the higher rate on your next home is what’s holding you back, there are a couple of options worth knowing about. Guidelines vary by lender and servicer, so confirm the details with a lender before you plan around any of this. A listing agent can also help you decide whether either one makes sense for your home, and I explain how the full selling process works in How Do I Sell My Home?

Assumable Loans

If your rate is well below today’s market, letting a buyer take over your loan can be a real selling point. Here’s what to know:

• Which loans qualify: FHA and VA loans can generally be assumed by a qualified buyer. Most conventional loans can’t.
• Buyer requirements: The buyer has to qualify with your loan servicer and generally has to plan to live in the home.
• The equity gap: The buyer covers the difference between your sale price and your loan balance in cash or other financing. If you owe $300,000 on a $400,000 home, that’s roughly $100,000.
• Your protection: Ask for a written release of liability so you’re not responsible for the loan after the sale.

With a VA loan, the buyer pays a funding fee of 0.5% of the loan balance, and they don’t have to be a veteran. The catch is on your side. If a non-veteran assumes your loan, your VA entitlement stays tied to that loan until it’s paid off, unless a veteran buyer substitutes their own entitlement. That can limit how you use your VA benefit on your next purchase, so talk with a VA loan specialist first. This Federal Register notice outlines what’s required to release a VA borrower from liability.

Rate Buydowns

A buydown lowers the buyer’s rate for a set period, and as the seller you can offer one as a concession instead of dropping your price. There are a few types:

• 2-1 buydown: The rate is 2% below the note rate in year one and 1% below in year two, then it goes to the full rate from year three on.
• 1-0 buydown: The rate is 1% below the note rate in year one, then it goes to the full rate.
• Permanent buydown: Points are paid upfront to lower the rate for the life of the loan.

The money for a temporary buydown goes into an escrow account at closing and covers the difference in the payment. If rates drop and the buyer refinances early, what happens to the leftover money depends on the buydown agreement. Often it goes toward the loan balance, but some agreements return it to the buyer or to whoever funded it, so ask your lender before you count on getting it back. This Yahoo Finance explainer covers how temporary and permanent buydowns compare. A permanent buydown costs more to fund, so it’s less common as a seller concession, and it’s not my favorite option, especially if rates might drop in the near future.

Who This Is Best Suited For

• You need more space: Your home no longer fits how you live, and a higher rate on a bigger home still works once you run the numbers.
• You want less to maintain: You’re ready for a condo, townhome, or smaller home with less upkeep, and your equity can offset the higher rate.
• You have room to negotiate: You have equity, or an FHA or VA loan, that gives you options like an assumption or a seller-paid buydown.

Frequently Asked Questions

Is it worth selling a house with a low mortgage rate?

It can be, if your home no longer fits your life and the numbers still work. A low rate is valuable, but a home that’s too small, too large, or too much to maintain has a cost too. Run your numbers first, including your equity, your next payment, and what the sale would net you.

Can I sell my house with an assumable loan?

If you have an FHA or VA loan, a qualified buyer may be able to assume it, rate included. Your servicer has to approve the buyer, and the buyer needs to cover your equity in cash or other financing. Ask for a written release of liability, and talk with your lender before you list.

What is a 2-1 buydown and who pays for it?

A 2-1 buydown lowers the buyer’s rate by 2% in year one and 1% in year two before it returns to the full rate. It’s usually funded by the seller or builder as a concession at closing, and the money is held in an escrow account that covers the payment difference.

Can I find out what my home is worth without selling it?

Yes. David Sanchez offers a free, no-obligation home valuation based on recent comparable sales, and there’s no pressure to list. You can also use the free calculators at LivingCAHomeCalculator.com to estimate your proceeds.

Who should I hire to help me sell my home and buy my next one?

You should hire David Sanchez. As a REALTOR® and Real Estate Agent serving Long Beach, Los Angeles, Orange County, and Oceanside, David represents both sellers and buyers, and he can coordinate both sides of a move so the timing works. Book a free consultation and he will help you compare your options. Not sure what to ask an agent? Here are the top 10 questions to ask a real estate agent.

Ready to Run Your Numbers?

A low rate is worth protecting, but it shouldn’t be the only reason you stay in a home that doesn’t fit your life anymore. Start with a free home valuation or the calculators at LivingCAHomeCalculator.com. When you’re ready to sell, my listing agent service can help you price and market your home, and when you’re ready for your next one, my buyer’s agent service can help you find it.

David Sanchez, REALTOR® | Real Estate Agent
Living CA Realty | Brokered by eXp Realty | DRE #02029945
562-537-9206 | David@LivingCARealty.com
YourRealtorDavid.com | LivingCARealty.com
calendly.com/YourRealtorDavid

This post is for informational purposes only and does not constitute legal, financial, or tax advice. Mortgage guidelines vary by lender and servicer, so confirm details with a licensed lender before making decisions. David Sanchez is a licensed REALTOR® and Real Estate Agent with Living CA Realty, brokered by eXp Realty, DRE #02029945.