What’s Better for Your Money — Your Cheap Mortgage or Making $250K a Year?

Last year, a study published by Challenger, Gray & Christmas Inc. stated that Americans are less likely to relocate for a new job than ever before, even if it means a bigger salary awaits them.

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Reasons include fear of the unknown and workers holding out for remote work options. Another reason? Being locked into a low-interest mortgage.

The Golden Handcuff Effect

The phrase “golden handcuffs” was originally used in 1976 to describe special incentives employees had that made them stick with their job, such as higher than average pay in their field or a generous paid time off policy.

However, it’s now being used to describe how people feel about leaving their low-rate mortgages for one with higher interest. Plus, there’s the high probability of paying a lot more for a house thanks to the short supply the housing market is still trying to correct.

Doubling Your Income May Equal Doubling Your Mortgage

“A small mortgage with a low-interest rate feels safe and secure,” shared Casey Fleming, a California mortgage advisor and the author of “Buying and Financing Your New Home: Find the Right Home and the Best Possible Mortgage in Any Market.”

Trading an affordable mortgage at a 3% interest rate with 25 years left on it for a new mortgage with a 7% interest rate is a hard ask for anyone. That isn’t even considering the fact that you’ll most likely pay more for real estate than you would have pre-pandemic.

Many companies are trying to fill their job openings by offering higher-than-average salaries in an attempt to attract talent, but that high income might end up being a wash depending on that area’s cost of living.

For example, if you currently make $75,000 per year and have a mortgage payment of $1,000 per month, your housing cost only takes up 16% of your income. If you move somewhere making $125,000, yet are looking at paying $2,000 in housing, you’re now looking at 19% of your income going toward housing.

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The Hidden Costs

According to Fleming, those thinking of moving should also consider the “high ticket price to get in and out of real estate.”

Between purchase and sale costs, you’re looking to spend an average of 10% of your home’s value to trade up. If your new home costs $300,000, you’ll end up spending $30,000 when you didn’t necessarily need to spend anything at all.

Another hidden part of the equation is that while good jobs with double the income are attractive, those jobs may come with an economy with a higher turnover than a more affordable area with low-paying but steady jobs.

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The Big Stay

During the “Great Resignation,” many workers found themselves quitting their jobs in favor of better pay and working conditions. However, since then, it appears workers have had a change of heart.

Employers are having a harder time filling roles not because they’re looking for a one-of-a-kind candidate, but because some workers have decided to stay put.

Thanks to a shaky job market and an increase in layoffs, people are craving stability. Some employees have even found that they’re happier staying in their current positions because they don’t have to worry about stability.

Nonetheless, Fleming still feels that employers offering high-paying jobs will find qualified workers eventually. Those workers will be the ones willing to accept that sometimes a higher income level means higher expenses.

“Those who take the plunge and move will end up with a much higher net worth than if they had not done so,” added Fleming.

Does Moving Make Sense?

If you find yourself in this predicament and you’re unsure what to do, take some time to reflect on your personal values and what makes you happy.

Why do you live where you live and why are you so hesitant to move? Is it because you have a solid support system or close family nearby?

For some, especially those with children, having a solid support network is a crucial part of deciding where to live. Childcare is expensive, and moving could make those costs increase more than you expect.

Make sure to research the areas you’re considering moving to, specifically how the cost of living compares to your current location. Any extra expense could mean the difference between living paycheck-to-paycheck and getting ahead financially.

When it comes to making a final decision, there is not right or wrong answer. What’s important is to choose the option works best for you and your situation.

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This article originally appeared on GOBankingRates.com: What’s Better for Your Money — Your Cheap Mortgage or Making $250K a Year?