Bought Too Much House and Feel Stuck? Here's One Move to Consider

In 2020 and 2021, many people clamored to buy homes as mortgage rates fell to record lows. And because demand was so high at the time, many people were willing to go to the extreme of buying a home sight unseen. They were also willing to make offers that were considerably higher than sellers' asking prices in an effort to secure an ultra-low mortgage.

If you paid a premium for a home not so long ago, you may now be regretting that decision if it's straining your finances. But there's a problem -- now's not a really good time to sell if you need to buy another home with a mortgage.

Sure, you might get a decent price for your home if you were to list it today. But as of this writing, the average rate on a 30-year mortgage is 6.87%, according to Freddie Mac.

If you're sitting on a 2.87% mortgage you locked in a few years ago, you may be loath to give that rate up. And frankly, even if you were to downsize or replace your current home with one that's less expensive, the higher interest rate on your mortgage could largely or fully negate your savings.

But while you may be stuck in a home that's eating up more of your income than you're comfortable with, you're not necessarily doomed financially. You may be able to turn your home into an income stream, or multiple income streams if moving isn't an option. Here are some ways to go about that.

1. Rent out a finished basement

If your home has a separate area that could serve as someone's fully functional living space, then you may want to consider renting out that portion for a period. Let's say you have a finished basement with a kitchenette and a full bathroom. If you're willing to give up use of that space, you could rent it out as its own apartment. And then, you can use your rental income to help cover your mortgage and other household expenses.

That said, you'll need to check with your local zoning department to make sure you're able to legally rent out your basement, or whatever part of your home you choose to rent out. Your property may need to meet certain requirements for this to be possible, so find out before you sign a lease you can't fulfill.

2. Rent out a parking space in your driveway

If you live in an area that's close to a business hub where parking is hard to come by, and you have a parking spot in your driveway that sits unused, you may have a prime opportunity to rent it out for income. And best of all, you won't have to welcome a stranger to live under your roof. You'll simply just park next to a car that isn't yours.

3. Rent out closet space

Maybe one of the things that helped you fall in love with your home was its generous amount of closet space. Well, now you can monetize that space by renting some of it out. Sites like StoreAtMyHouse allow you to list the storage space you have available and find people in need of it.

That said, if someone is renting a closet in your home, they'll need access to it. You may not love the idea of a stranger coming in once a week to access their belongings. So while this is a potential solution, it may not be an optimal one.

If you move forward with this sort of arrangement, you'll need to make sure to put some carefully worded rules in writing. For example, your agreement might dictate that your closet-renter can only access your home while you or another adult owner is present.

It's a terrible thing to feel like you've taken on too much house. But rather than resign yourself to struggling financially, see if it's possible to monetize your home until your income either picks up or housing market conditions become more favorable for a cost-effective move.