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should i remodel or buy a bigger house?
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after a 6% commission to sell, you have $80k in equity. 20% down on a $400k house.  5% down will likely cost you pmi, and i don't know that you'll ever see a 3.14% rate.  the realtor may very well have knowledge of the cost to finish a basement, but i don't ask my doctor for tax advice, and i'd not ask a realtor for construction advice. my basement flooring was $20/sqft for a gym quality rubber tile. you can also get $2/sqft carpet. i'd take the $15k number with a grain of salt until i got real bids. what's there now? poured cement? is there clearance to put in a proper subfloor and still have adequate ceiling height? there are a lot of details that you need to research to do it right.  that said, the move to a bigger house impacts your ability to save to the extent that you are taking too large a risk. the basement finish, even if $20k, is just a bit more than the commission on your home. i like the idea of sticking it out. once the nanny is gone, enjoy the extra income, and use the money to boost your savings and emergency funds.  as i read your question again, i suggest you cut the college funding in favor of the emergency fund. what good is a funded college account if you have no funds to sustain you through a period of unemployment?  there's a lot to be gained in holding tight for these 3 years. it seems that what's too small for 5 would be spacious once the nanny is gone and the basement added. the cost of a too-big house is enormous over the long run. it's going to rise in value with inflation, but no more, and has all the added costs that you've mentioned. on a personal note, i'm in a large house, with a dining room that's used 2 or 3 times a year, and a living room (different from family room) that is my dog's refuge, but we never go in there. in hindsight, a house 2/3 the size would have been ideal.   finishing the basement doesn't just buy you time, it eliminates the need for the larger house.
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