Pop the Top or Move? Which One Wins Out in 20 Years

You need more room and you are sitting on a mortgage near 3 percent. Two roads get you there: add a second story and keep the old loan, or sell and buy something bigger. This guide walks the full 20-year cost of both on one Denver house, with a real amortization schedule behind every number.

The house we are modeling

Start with a home bought in 2020 for $800,000, worth $1,040,000 today at about $416 a square foot. The mortgage is $640,000 at 2.75 percent, and six years of payments have brought the balance down to roughly $550,000, so there is about $490,000 in equity. Both plans below take this same house to 3,700 square feet, so the finished space stays equal and the comparison is fair.

Plan A: pop the top

Add 1,200 square feet upstairs for $648,000 all in. Half of that, $324,000, comes from a home equity loan at 7 percent over 20 years. The other $324,000 you bring in cash. The first mortgage never moves, so your $550,000 stays parked at 2.75 percent. For about six months the house is open to the weather and you rent elsewhere, roughly $40,000. Finished, the home is worth around $1,539,200.

Your two loans together run $5,125 a month.

Plan B: move up

Sell the house for $1,040,000. A 6 percent commission takes $62,400. Paying off the $550,000 mortgage leaves about $427,000. The next house is also 3,700 square feet but newer, at $458 a foot, so it lists at $1,693,120. After the down payment you finance $1,265,916 at 6 percent over 30 years. Closing and the move add about $30,000.

That single loan runs $7,590 a month.

How the down payment works

The down payment on the move is not new savings. It is the equity from your current house, carried across. Selling and clearing the commission and the old loan frees about $427,000, and this model rolls every dollar of it into the new down payment. That is the friendliest version of moving, because a larger down payment means a smaller new loan and less interest over its life. Even with the whole $427,000 working for it, the move still lands where it lands below.

Where the money goes

Moving does two costly things in the same afternoon. It pays off the cheapest loan you will ever hold, and it borrows more than twice as much at today's rate. Your 2.75 percent money is gone, and $1.27 million now sits at 6 percent. Popping the top leaves the cheap loan alone and stacks a smaller second loan on top of it.

Monthly payment

  Pop the top   ██████████████           $5,125
  Move up       ████████████████████     $7,590

Over 20 years the interest is where the gap really opens.

Interest paid over 20 years

  Pop the top   ████████             $474,167
  Move up       ████████████████████ $1,239,277

The mover pays about $765,000 more in interest for the very same square footage.

The 20-year numbers

	Pop the top	Move up
Your 2.75% mortgage	kept	paid off
New borrowing	$324,000 at 7%	$1,265,916 at 6%
Monthly payment	$5,125	$7,590
Cash up front	$324,000 build + $40,000 rent	$62,400 commission + ~$30,000 close and move
Interest over 20 years	$474,167	$1,239,277
Total cash paid over 20 years	$1,593,931	$1,914,350
House value at year 20	$3,372,577	$3,709,834
Loan balance at year 20	$118,632	$683,640
Equity at year 20	$3,253,945	$3,026,195

What you keep

At year 20 the bought house is worth more on paper, $3.71 million against $3.37 million, because it started pricier and rode the same appreciation on a bigger base. Look at what you owe, though. The move still carries $683,640 of debt, while the pop top is down to $118,632. Net it out and the pop top leaves you with $3,253,945 in equity against the move's $3,026,195. Fold in the cash you never handed to a broker and the $2,465 you saved every month, and popping the top leaves you about $548,000 wealthier at the 20-year mark. Checked two ways, as lower net cost and as higher ending net worth, the figure comes out the same.

The assumptions behind it

Both houses appreciate 4 percent a year, Denver's rough long-run pace. The horizon is 20 years. The model counts the cash you pay and the equity you keep, and it does not credit either side with investment returns on money left over, which keeps the comparison to what you can see on a statement. Every figure comes from a plain amortization schedule, so a different balance, rate, or build cost moves all of them together.

When the math changes

The case rests on a cheap first mortgage and enough equity to borrow against. Buy your house in the last year or two at a rate near today's and there is no low rate to protect, so the gap narrows fast. Run thin on equity and the second loan may not reach the build cost. And if what you really want is a different block or a brand-new house rather than more room where you are, that is a reason to move that a spreadsheet does not capture. These are illustrative numbers. Take your real balance, rate, and a build quote to a loan officer before you lean on any of it.

For most Denver families holding a 2020 or 2021 mortgage on a lot they like, the second story keeps the good loan and buys the room. The cost guide sets the build budget these loans have to cover, and the guide to controlling costs holds that number down. The financing guide walks the loan options in more detail. When the plan is ready, browse the gallery of finished pop tops to see what the money builds.