One of the things to think about before buying a home is how long you expect to live there. If you’re planning to move in a year or so, you may be better off delaying your purchasing decision.
What if you already own and home and are trying to decide if you should sell? Well, the experts recommend living in a home for five years before selling it. Are they right? Here are some points to ponder.
Why Would You Move?
Staying in a house as long as possible makes sense. After all, you probably spent considerable time and energy finding it, negotiating for it, and working with a lender to finance it. Sometimes, though, personal circumstances make it the right time to sell, regardless of what the pros say. Think about why you want to sell.
Selling may be worth it even if you’ve only lived there a year or so if:
- You’re moving to a new city to take a better job with higher pay or greater stability.
- You’re expanding your family and don’t have enough room.
- Your financial situation has changed (a job loss or divorce, for example) and you can no longer afford the mortgage.
- Your neighborhood real estate market has gotten smoking hot, and you could make a big profit.
Keeping it longer is probably the best choice if:
- You decided you don’t like the layout of the house, want a bigger yard, etc.
- You think you’d prefer a different section of town.
- You got a raise and would like something bigger, just because.
In addition to why you want to move, you also need to consider:
How Much Equity Do You Have?
Equity is the difference between what you owe on your home and the price you could sell it for. Homeowners can build equity in a home several ways:
- You can put a significant percentage down at closing.
- You can make updates and renovations on it (which helps it sell for a higher price).
- You can keep it until real estate prices rise.
It’s less than ideal to sell a home if you have little or no equity. If you don’t have any equity built up in your home, you’ll be better off staying in it until you can be sure to clear the amount you owe on it.
What Is Your Current Interest Rate?
There have been periods in the last decade where borrowers could land dirt-cheap mortgage interest rates. These help homeowners buy more house and keep their monthly payments low. If you were one of the lucky ones who snagged a low rate, it may be in your best interests to stay in the home.
How Much Would Your New Interest Rate Be?
Interest rates have dramatically increased recently, wreaking havoc on many buyers’ plans. If you sell your current home, you can’t take your mortgage loan with you. Your new one could be several points higher in mortgage interest. In this scenario, it may be better to stay in your current home until rates decrease.
Can You Cover Your Closing Costs?
There are various costs associated with buying a house that buyers typically pay at closing. These can add up to thousands of dollars and are sometimes rolled into the mortgage loan. If you sell your house too soon, the price you get paid for it may not cover these costs. It’s smart to remain in a home until the monthly mortgage payment has covered the closing costs (which can be a few years).
So, Should I Stay in My House 5 Years Before Selling?
Are the experts right after all? In the general sense, yes.
It makes good financial sense to stay in a home you bought and pay the mortgage payments on it for five years. However, only you understand your personal finances and situation. There are reasons for selling sooner. You just need to be prepared for the down sides, like not covering the closing costs and not making any money off the sale.
If you’re thinking about selling a home you’ve lived in for less than five years, think carefully about your decision. Examine how much equity you’ve built up, and weigh the pros and cons of selling. It may also help to talk with a professional real estate agent about your circumstances. Only then should you make such a big financial move.