Have a 3% Mortgage? Run the Numbers Before You Move or Renovate
5 min read
Love your neighborhood but outgrown your house? Before you give up a low mortgage rate, compare moving with adding on. A worked example, the assumptions behind it, and how to decide which path fits your family.
You love your street. The kids walk to school and the neighbors are friends. You also locked in a mortgage around 3% a few years ago. But the house that fit your family then doesn’t fit it now.
Moving feels like the obvious fix. But selling means giving up that low rate, and a new mortgage at a higher rate can change your payment more than people expect. Before you list the house, put the two paths side by side.
The Short Answer
If you have a low mortgage rate and need more space, compare the cost of moving with the cost of adding on before you decide. In the example below, keeping a 3% mortgage and borrowing separately for a $150,000 project comes out about $1,300 a month lower in principal and interest than moving into a new $650,000 mortgage at 7.3%. Your balance, rates, equity and project cost will change the answer, and sometimes moving is the better call.
Let’s Run the Numbers
Here’s a simple example, worked out with a standard 30-year mortgage formula. These are illustrative rates for the example, not quotes or today’s offers, and every figure is principal and interest only.
Your current mortgage: $500,000 at 3% over 30 years is about $2,108 a month.
Option 1, move: a new $650,000 mortgage at 7.3% over 30 years is about $4,456 a month.
Option 2, stay and build: keep the $2,108 payment and borrow $150,000 for the project at 7.5% over 30 years, about $1,049 a month, for a total of about $3,157.
The difference is about $1,300 a month. Both options leave you owing $650,000. When you stay, only the $150,000 for the project carries the higher rate, not your whole home.
What this example leaves out
This is a principal-and-interest comparison only. A few things it doesn’t cover:
The $2,108 assumes a $500,000 loan at the start of a 30-year term. If you’ve been paying for a while, your balance, remaining term and payment are different.
The $650,000 is the new mortgage amount, not the purchase price. The equity you’d get from selling could lower the amount you need to borrow.
Option 2 assumes you qualify for separate financing. A 30-year renovation loan at 7.5% is hypothetical, and real products often look different.
Taxes, insurance, closing costs, selling costs, loan fees and moving costs aren’t included in either option.
An addition can also change your property taxes, insurance and upkeep, and what the house is worth.
When you stay, only the $150,000 for the project carries the higher rate, not your whole home.
When Moving Makes More Sense
Moving is worth a serious look if:
You need a lot more space than an addition can realistically give you.
Your lot can’t fit an addition, or zoning and setbacks won’t allow the one you need.
Your neighborhood or school priorities have changed.
The renovation would cost too much, or living through construction isn’t workable for your family.
A different home fits where your family is headed over the next ten years.
Count everything on the moving side: selling costs, closing costs on the new loan and the move itself. A free home valuation shows what your equity really looks like.
When Staying and Building Makes More Sense
Adding on tends to pencil out when you love where you live, want to keep your low rate, have a lot that can take an addition, plan to stay for years, and have a realistic budget for the project. Borrowing for the project on its own is what keeps your first mortgage in place.
It isn’t automatically cheaper. Construction costs, a second loan and the time it takes to build all count.
What Could You Build?
A bigger kitchen. Expanding a cramped kitchen can change how the whole house works. See how we approach a kitchen remodel.
A primary suite. A larger bedroom, bath and closet without leaving the neighborhood. Start with our home additions page.
A second living area. A game room or den so everyone has room to spread out.
A garage apartment. Space for guests, aging parents or a home office. Here’s more on building a garage apartment in Fort Worth.
Whether any of these works depends on your lot size, zoning, permits, construction requirements and budget, and not every property can take every addition. Our guide to what a home addition costs in Fort Worth is a good next read.
How People Pay for an Addition
We don’t offer loans or financial advice, but these are the options homeowners most often ask a lender about:
HELOC (home equity line of credit). A line of credit against your equity that you draw from as you need it. Rates are often variable, and many start with an interest-only period before regular payments begin.
Home equity loan. A one-time lump sum against your equity, usually at a fixed rate with a set payment.
Construction or renovation loan. Built for projects, often based on the plans and budget. Terms and payment structures vary widely, and some convert into a longer-term loan once the work is done.
Talk with a qualified lender about what you’d qualify for and what the payments would really be.
Before You Move, Run the Numbers
Moving and adding on can both make sense. The better choice depends on your monthly payments, total borrowing costs, equity, project cost, what your lot allows and what your family needs long term. Sometimes the better home for your family is the one you already own, and sometimes it’s the next one.
For your own house, our page on whether to add on or move in Fort Worth walks through the two numbers to compare.
Frequently Asked Questions
Should I sell my house if I have a 3% mortgage?
Not necessarily. Selling means replacing a low-rate loan with one at a higher rate, which can raise your payment a lot. If your house would work with more space, compare adding on with moving first.
Is it cheaper to add on or to buy a bigger house?
It depends. Keeping a low-rate mortgage and financing only the project can lower your monthly payment, but construction costs, your equity, your lot and the financing you qualify for all change the answer.
Can I keep my mortgage and still borrow for an addition?
Often, yes. Homeowners commonly use a HELOC, a home equity loan or a construction loan for the project and leave their first mortgage in place. A lender can tell you which options fit your situation.
Talk It Through With Us
Our construction, interior design and real estate teams work under the same roof, so we can look at both sides with you: what an addition would take on your lot, how it would live, and what your home could sell for. Staying put? Book a free walk-through: a designer and a builder walk the house with you and give you an honest estimate, with no obligation. Thinking about moving? Start with a free home valuation from one of our Fort Worth listing agents.
