How Long Should You Live In Your Home Before You Sell It?
Whether you just moved in or have lived in your home for 50 years, it's common to wonder how long you should stay in your home before you sell it. According to the National Association of Realtors®, ten years is the average amount of time that a homeowner will stay in their home before deciding to sell it.
If you've been living in your home under ten years and are itching to sell, we put together a few of the most important factors that you should consider while making that decision.
1. Your Mortgage
One of the first and foremost factors you must consider when you decide to sell your home is your mortgage payment. If you want to make money when you sell your home, then your sale price must be greater than what’s left of your mortgage. When you first buy your home and begin to pay your mortgage, the first few years will go primarily towards interest rather than the principal amount. This typically means that it’s more difficult to make money off your sale if you've been living there less than 5 years. However, if you put a larger downpayment on your house, then your interest rate and mortgage will probably be smaller, making it possible to make money in a shorter amount of time.
Building home equity is important. You’ll want to have a lot of equity built up when you decide to sell. The amount of home equity you’ve obtained depends on any remodeling or renovations you’ve made, as well as your mortgage. If the home you bought was already in tip-top shape, then it may be difficult to build equity. If you’ve remodeled the kitchen, bathroom, redone the flooring, or made other renovations around the house, then you have most likely gained home equity. You can also increase your home equity by paying off more of the principal on your mortgage.
3. Market Conditions
One of the more common reasons you’re eager to sell your home is to make money on your property. There are a few things to look out for when deciding if it’s a seller's market and whether or not it's time to make your move. If you notice the price per square foot in your area is increasing, chances are that homes stay on the market for a shorter time. You should also take note of homes near you that are selling. It might seem time-consuming, but don't worry! We always keep track of recent home sales in the area and can send you over an up-to-date market report.
4. You're Out Of Space
Maybe this was the first house you bought when you were expecting your first child and there were only three of you, but now with three kids and two dogs, there isn't much space. Although it may be sad to move out of the home where you started your family, the happiness of your family may be greater than the cost of selling your home and buying a new one.
Other life situations like divorce, illness, or even the need to downsize may also lead you to sell sooner than you originally planned.
5. Capital Gains Tax
If you don’t qualify to avoid paying short-term capital gains taxes (taxed at the normal income tax rate) on the sale of your home, you may not want to sell your home yet. To avoid short-term capital gains taxes, you should make an effort to stay in your home for more than one year. If you have to pay capital gains tax, making a sale before at least one year could ultimately leave you without much equity.
6. Closing Costs
Closing costs are often overlooked but play an important part when it comes to selling your home. On average, real estate agents have a commission rate of 6% when you sell your home. You are also likely to pay closing costs when selling a home, which can be between 3%-6% of the purchase price of the home. Keeping closing costs in mind before you sell allows you to budget this into your expenses and avoid surprises when it comes to closing.