Can you put a price on peace of mind? It turns out, some can — and for Dennis Stalmack and his wife, it comes out to around $1,200 per month.
That’s how much more the couple is paying for the mortgage on the home they bought this year versus their old one. Not because they decided to upgrade their living arrangement—in fact, the homes have almost identical specs. Both are around 1,700-square-foot ranches with similar layouts, located in 20-year old developments equidistant to downtown St. Louis.
But despite the similarities, the couple’s new mortgage costs $2,800 per month, compared to $1,600 before.
The difference stems from timing. Stalmack bought the first home in Missouri in 2018, securing a 4.5% mortgage interest rate he later refinanced to 3% during the Covid-19 pandemic. That made the 37-year-old part of the 98% of homeowners in the U.S. who have below-market mortgage financing, according to Goldman Sachs.
The rock-bottom rates hit in the early pandemic rates are keeping some people in homes they’re less than in love with, either as their primary residence or as landlords. “I don’t know if stuck is the right word, but a 2.62% interest rate is hard to give up right now,” one owner recently told Fortune. But Stalmack and his wife broke free of the so-called golden handcuffs, more than doubling their once-in-a-lifetime mortgage rate in the process. The couple bought the new home, located in rural Illinois, for $60,000 more at 6.675%.
“We’d do it again in a heartbeat,” Stalmack says.
‘She’s got hours of her life back’
They made the pricey change for their sanity. Stalmack’s wife, who is an attending doctor at a hospital in Illinois, was traveling 65 miles each way to work, often spending the night when she was on call. Though they were happy in Missouri, a year of commuting two-and-half-hours a day—not to mention the overnights—was too draining to justify long-term, even for a historically low interest rate. (Stalmack himself works at home in cybersecurity, and is happy to work from anywhere as long as it has a reliable WiFi connection.)
“We were committed to making her life better,” he says. The couple now lives a 20-minute drive away from the hospital. “We don’t regret it. She’s got hours a day of her life back.”
Stalmack notes that their move wasn’t necessarily the one that made the most financial sense on paper, joking that budget “experts” are likely shaking their head at the decision. But their life is not a spreadsheet; in reality, it’s what works for the two of them. They both earn over six figures and their substantially higher mortgage isn’t straining their monthly budget. Plus, they are now saving on gas, car maintenance, and other costs due to his wife’s substantially shorter commute.
More importantly, they see each other every day now, and she doesn’t have to spend seemingly all of her free time hours away from home.
“This is definitely a short-term play for us, this isn’t a forever home,” he says. “We bought with what was out there. But we’re not upset with it.”
‘Mortgage rates were not going to change our plans’
More are likely to follow Stalmack’s lead, Sean Williams, a Maryland-based CFP, has told Fortune. Despite the bite of high rates, people still move for work, because the house doesn’t live up to their standards, or because, like the Stalmack household, their quality of life may demand it.
For most people, the interest rate isn’t the deciding factor on whether or not to buy a home. More important are inventory and the all-in cost. Plus, refinancing may be an option in the future. If owning is the dream, then determined buyers shouldn’t get hung up on high rates, experts say.
“Home values can move. And so can interest rates,” says Williams. “It’s sort of like investing in the market. You can look back and say, ‘Oh, I could have timed it.’ But it really makes sense to put yourself in the best financial position possible no matter the season.”
Still, losing a sub-4% rate when they now hover around 8% stings. Stalmack and his wife briefly wondered if they should keep their Missouri home—and the 3% rate—and rent it out. Ultimately, though, it was too much work to be an “unintentional landlord,” Stalmack says, and the couple thought it made more sense to use the equity from their old house to pay down the mortgage on their new one.
Plus, because she works at a rural hospital, his wife can have her student loans forgiven if she stays at her job for a certain number of years. That is the true “golden handcuffs,” Stalmack says.
“We went through that calculus pretty intently,” he says. “From the financial long-view perspective, it would have made sense to keep [the old house], but it wasn’t our priority at the end of the day.”
The couple went into the buying process knowing they likely weren’t going to find the place they were going to live forever. With that in mind, they were “tactical” about picking a house that would be easy to resell. It’s attractive to first-time buyers—it has room to start growing a family—but also to retirees. It’s also close to amenities like grocery stores, while also being within a reasonable drive to a major urban area.
That gives them confidence that once they decide to move on, their finances won’t suffer, even with the significantly higher mortgage payments.
“We’re going to come out ahead no matter what,” Stalmack says.