Sell a house with 2% mortgage?

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We bought our Northern California house in 2008 and paid $850K. We refinanced in 2020 at 1.99%, today this house is worth $2.2M. My dilemma is that I have parents who live with my wife and 2 kids, so there are 6 of us. It’s a decent size house but we feel like we could use more space so we want something a little bigger and modern. New homes in this area go for around $3M, this would be a 5 bedroom 3800sq ft or so. I was telling my wife that we should remodel our current home and put all the best stuff in it, such as sub zero refrigerator, wolf range, nice floors, etc. Also we would add an ADU so we would be adding an additional 400 sqft to the entire house. I feel that by updating our current home, we can get at least $2.6M-$2.8M. So I told my wife that we should go with this plan and then sell the house if we can get our price and then go and buy the house we want that is around $3M. Yes we would be giving up the 1.99 rate, but at the same time we would be banking on all the equity that the house has accumulated. Just wondering if this would be a smart move? I ask because I hear a lot of people saying “don’t sell if your interest rate is 3% and below”, but I have to disagree for my scenario, right or wrong?

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Sell a house with 2% mortgage?
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