09 Oct I’m thinking of downsizing. Should I?

Q. I’m thinking of downsizing because my kids are out of the house. I’ve been looking at townhomes, and even though I will get a good profit from my home I will still need a mortgage. But with interest rates being much higher than my current mortgage, I’m having trouble taking the jump. How can I decide?
— Homeowner

A. What you’re experiencing sums up the current state of the housing market.

You’re ready to leave your home, but prices have gone up and mortgage rates have doubled.

A common saying in real estate is “date the rate, marry the house,” said Matt Rembish, a certified financial planner with OneDigital in Boonton.

This essentially means you can always refinance if interest rates drop, he said.

“The issue with that is that no one has a crystal ball on when interest rates will drop, and what they will drop to,” he said. “Make sure that the mortgage you would be getting works within your budget. Sub 4% mortgage rates are not the norm historically, so it is not something I would assume is guaranteed to happen in the future.”

A general guideline is that your monthly housing costs — principal, interest, taxes, and insurance — be no more than 28% of your monthly gross income, Rembish said.

“In today’s environment I would argue this number is less realistic,” he said. “If more of your monthly income goes towards housing, that is fine. Don’t allow this expense to take away from your other savings goals.”

Now the other factor here is a non-financial aspect.

“Sometimes a decision doesn’t have to make the most sense financially, but is better for your overall happiness,” he said. “If you feel like downsizing is the best decision for you, don’t focus on the increased interest rate. What’s most important is that you are in an area that you like and the new mortgage works within your budget.”

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This story was originally published in October 2025.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.