Should I Downsize in Erie If I Have a Low Mortgage Rate?

Should you downsize if you have a low mortgage rate? You can, and many people in Erie and Boulder County do, but the rate is only one part of the answer. What matters more is the full monthly cost of your life in each home, and how much of your equity you'd carry into the next one. When you put those side by side, the decision often looks very different from the headline rate.

I hear this question almost every week. The kids are grown, the house is quieter, and the stairs and the yard feel like more work every year. Then someone says, "But we have such a good rate. Why would we give that up?" It's a fair question. It deserves real numbers, not a sales pitch.

I'm Carol, and Homes by Carol is my real estate practice here in Erie. Carol Vanlandingham is a REALTOR® with eXp Realty in Erie, Colorado, helping people through life transitions, downsizing, first homes and relocation across Erie, Boulder County and Northern Colorado. I've lived in this area for over 31 years, and I've been licensed for 10.

Because it feels like something you earned and can't get back. You locked it in years ago, you've made the payments, and now the payment feels small. Trading it for a higher rate can feel like a step backward, even when everything else about the move sounds right.

There's usually more under it, too. The house is where you raised your family. The rate becomes an easy reason to stay, because it's a number. The harder reasons, like memories and the fear of regret, are tougher to say out loud.

Both of those are real. Neither one is a mistake. They just aren't the whole picture.

Compare what each home costs you every month, all in, and what you'd have left over. Your mortgage payment is one line. It sits next to a lot of others.

Here's a simple list to fill in for the home you have now:

• Your mortgage payment, including taxes and insurance if they're part of it
• Utilities for every room, including the ones nobody uses
• Yard care, snow removal and the time you spend on them
• Repairs you've been putting off, and what they'll likely cost
• Any HOA dues
• Things you'd pay to have done because the stairs or the size make them harder

Then fill in the same list for the kind of home you'd move to. A smaller, single-level home often costs less to heat, cool, repair and keep up. Some have yard care built into the HOA.

The biggest difference is usually the loan itself. Many people who've lived in their home a long time have a lot of equity. If you sell and put a large part of that toward the next home, your new loan can be much smaller than the one you have now. A higher rate on a much smaller loan can mean a payment close to what you pay today, or sometimes less. Some people don't need a loan at all.

I can't tell you what your rate or payment will be. A lender can. What I can do is show you what you'd likely walk away with from your sale, so your lender has a real number to work with.

Here's the order I walk people through. Take it one step at a time, and stop whenever you need to think.

Step 1: Write down what you want your days to look like

Before any numbers, talk about life. What would a good ordinary Tuesday look like in your next home? Who do you want close by? What are you done taking care of? Many of my clients tell me they want less yard, fewer repairs and fewer stairs, so they can spend more time with family and friends. Some want one level with a basement for guests and storage.

Step 2: Find out what your home is worth

Get a free home value report. It comes by email with a video that walks you through it. It doesn't commit you to anything. It turns a guess into a number.

Step 3: Estimate what you'd walk away with

From the value, I put together an estimate of your proceeds at a few different prices, after commissions and typical closing costs. My post on how much you'll walk away with when you downsize explains how that works.

Step 4: Ask a lender for a side-by-side

Take that proceeds number to a lender. Ask them to show you the monthly payment on your next home with different down payments. Ask them to compare it to what you pay now. That's the plain math, and you can check every line of it.

Step 5: Add up the all-in cost of staying

Use the list above. Be fair to your current home, and be fair about what it's really costing you in money, time and energy.

Step 6: Decide the order of the two moves

Selling first, buying first, or lining them up close together each have their own tradeoffs. My page on trading up explains the common ways to do it, and they work the same way when you're moving smaller.

Step 7: Bring in your accountant

Questions about taxes on the sale belong with your accountant or attorney. Those answers should come from them, not from me.

These are the ones I see most often.

• Looking only at the rate. The rate is one number. The payment, the upkeep and the equity you keep are the numbers you live with.
• Forgetting what staying costs. A big house has costs that don't show up on the mortgage statement, like repairs, utilities and your Saturdays.
• Guessing at the sale price. A guess, high or low, can talk you into or out of a move. A real value report fixes that.
• Skipping the lender conversation. Without a lender's side-by-side, you're comparing a real payment to an imagined one.
• Waiting for rates to drop before you even look. You can learn your numbers now and still decide later. Looking doesn't lock you into anything.
• Deciding the house question alone. If you're a couple, talk through what each of you wants. One of you may be ready before the other, and that's normal.

One couple I helped had lived in their three-level Boulder home for 37 years. They wanted single-level living for the next chapter. Just as much, they wanted to stay close to their doctors and the community they'd spent decades building.

We didn't start with a rate or a price. We started with what their everyday life needed. We found them a home in Erie, about 15 minutes from Boulder, that gave them single-level living and kept them close to the people and places they counted on. We weren't trying to find less. We were trying to find better for them now. After closing, we had dinner together to celebrate.

That's what this decision is really about. The rate matters. So does the life you want to live in the next ten or twenty years.

Erie has grown a great deal over the last 20 years. Several Boulder Creek Builders neighborhoods here have single-level ranch homes built for lock-and-leave living, and that's why many people who are right-sizing start their search in Erie. You can read more in my post on lock-and-leave homes in Erie, or on my downsizing and right-sizing page.

Erie sits about 15 minutes from Boulder and from Longmont. For a lot of people, that means they can move to a smaller home and keep the same doctors, friends and routines.

Then you stay, and you'll know why. I'm your advisor, not the decision-maker. If your numbers or your timing say "not yet," I'll tell you that. We can look again in a year, or whenever something changes. Knowing your options still helps, so you're never guessing.

Is it a bad idea to give up a low mortgage rate?

Not always. A low rate is worth a lot, but so is the equity in your home. If moving lets you take a much smaller loan, or no loan, your payment may not change as much as you fear. A lender can show you the real comparison.

Can I keep my rate if I move?

Most of the time, a new home means a new loan at today's rates. Ask your lender whether any option fits your situation. They're the right person to answer that.

How much equity do I need for downsizing to make sense?

There's no single number. It depends on what your home sells for, what your next home costs, and what payment you're comfortable with. Start with a free home value report and a lender's side-by-side.

Should I wait for rates to come down?

Nobody knows when rates will move or by how much. You can learn your numbers now and decide later. Waiting costs you nothing if you're happy where you are. It costs more if the house is getting harder to live in.

Do you help with both selling and buying?

Yes. When you're selling one home and buying the next, I plan both moves together so the timing works for you.

If the rate is the thing holding you back, let's put real numbers next to it. Send me a note or call me at (303) 522-3130. I'll listen first, and you'll make the decision.