What to do with my mortgage?
First time home buyers from 2021 with a 2.3% FHA rate but …we didn’t put much down so have PMI and our monthly is $3400 - it’s approx $1100 for escrow, $1100 for principle, and $1100 in interest on a $600k purchase price and $535k balance.
Our area isn’t super desirable and the home is small. We would like to move to something in a better neighborhood with more space (max budget is 1.1M but would be more comfortable at 900k with 20% down) but appreciation in the house has been minimal - I’d guess we could sell for $650-$700k. We do have an assumable FHA mortgage, with the one thing we have going for us is living in a VHCOL city so lots of tech folks with cash to bridge the gap easily.
So we are trying to understand if we should hold onto this rate because everyone says to never let it go - is the idea keeping it until the house someday (hopefully) appreciates 2x or 3x? Like it may not be worth it if it takes another 20 years and we paid $200k in interest to appreciate say $300k, where if we theoretically sold now we could still make a $100k profit (and get rid of a $3400/month payment). Is the low interest rate supposed to be a safe gamble that the house will have a big appreciation in the long term? Doesn’t it offset since our payments are so high and become a wash? Like why would someone else want to assume it knowing the above?
My brother bought a house in 2018 for $500k and it is valued at $900k now so if we picked a better neighborhood I’m trying to understand justifying keeping this rate for a house that doesn’t have a lot going for it when we could buy something else with the profit as a down payment vs pulling from a HELOC and have a much better chance of that house appreciating much faster (most in our city do, we literally picked the worst neighborhood possible, but 2021 was ridiculous for bidding wars so options were limited). We could keep it and purchase a second home (this time 20% down) and rent it out (for less than the mortgage unfortunately) but why? We could pay it off in the next 6-7 years if we really tried but people say with that rate don’t pay it off aggressively, but why? Just trying to look at all the angles and learn. Obviously still so novice with this all and want to make more educated decisions the second time around.