Real EstateReal estate for SeniorsUncategorized July 23, 2022

What is the locked-in effect?

The “locked-in effect” is what happens


  1.  Your current mortgage is so low that it’s just too attractive to stay put, as anywhere you move to will be too expensive to consider
  2.  You refinanced into a historically-low rate, the monthly payment is ridiculously low, and if you buy anything new, your rate will now be much higher

Basically, you’d love to move but staying put just has too many benefits.  This is one of the factors affecting the housing market today.  Is this your situation?

You are not alone.

Many saavy homeowners took advantage of the ultra-low mortgage interest rates during the pandemic (me included).  Unless it makes financial sense to sell, those homeowners will be staying put for a LONG time (me too!).  With mortgage rates well under 3% when people did refinance, hopefully most did the smart thing and did not take out their equity.  But human nature being what it is, I suspect that about half did just that and when the real estate market ebbs down again (as it usually does after high rates of appreciation), they may see themselves as being “upside down”.  At that point, they can just ride the wave and stay put or decide to reach out to their lender for assistance.

To counter the “locked-in effect”, consider that if under the current real estate environment you would cash out more than you could ever imagine and use that money towards “X”, then selling may make sense.  At the end of the day, it is a personal financial decision and considering all the facts may help you make a good decision.

Call me if you want to discuss this more. 305-431-5594.