How long should you intend to live in a (new) house to make it a worthwhile purchase financially?
Answer:
There is no magic number. It all depends on the real estate market. Your main concern is probably recouping your transaction costs, or more simply, you want to have at least as much money after you sell as you spent to buy the place. To accomplish this, you will want the home to increase in value by at minimum 10% (6% for realtor commissions, 4% for transfer costs, settlement etc.). When the market is "hot," as it was in the last few years, you can get this within 1 year. Unfortunatley, we are entering a slower housing market throught the country. The good news is that the slow market should only be around for about 2-3 years. I am not saying that the market will be "hot" again after that, but by your planned sale date 5 years from now, you should have sufficient appreciation to recoup the transaction costs plus money to put in the bank.
Also, newer homes tend to appreciate well, because they tend to be more desirable to buyers with money to spend than older homes. So I would say that you are doing alright.
Lastly, make sure to select the proper financing. Avoid interest only mortgages and adjustable rate mortgages where the rate may increase within the next 5 years. A fixed rate mortgage or a 5 year ARM (an adjustable rate mortgage where the rate is fixed for the first 5 years) would work well for you. Take a lower term (15 or 20 years) if you can afford it, as this will speed up your pay down -- this will allow you to take back more $ once you sell.
It all depends on the market and how much equity you can get out of the home. If you can get $25,000 more tomorrow for the house I would go for it.
Typically a home owner will want to stay at least 5 years.
At the very minimum 2 years. Do NOT get an interest only loan for this house -- you may end up owing more when you sell in 2-5 yrs than the house is worth.
If you don't plan on living there forever, why move there??
You have to at least live in it for 2 years because if you don't then you will have to pay capitol gains (big time taxes) on any profit you make off of the home. The rest depends on the market. Right now the buying and selling market is kind of slowing down but it is a pendulum and will be back up again.
It usually takes about 5 years to recover closing costs (assuming you paid them).
5 years is typically the rule of thumb.
5 years is probably fine. Check out this http://www.mortgage-calc.com/amortizatio.
When you do it click "amortization" not calculate. And it'll tell you how much equity, etc, etc you'll have month by month. It makes no assumptions of appreciation though.
Also- the deduction (property taxes) on your income tax should play a factor. It's almost always cheaper to own than rent in the short and long run.
Slainte,
-D
Since you're thinking about doing this house as a "starter home" you should live there for at least 3-5 years so you can recover your closing costs. The trick is to make sure you pay down some of the principal on the loan and to sell your home for more than what you paid for it, so you need to invest some time and money in it (painting, landscaping, etc.). The market may not be good in your area in 5 years, so you may have to wait longer. And remember that the longer you stay in that house, the more principal you'll pay against the loan. It's a bit of a balancing act though because you may be better off selling after 3-5 years if you'll make a lot of money on the sale. If you're planning on moving, I wouldn't stay there any longer than 10 years unless the market is REALLY bad at that point. When you think you're ready to sell, just check out what houses in your area are going for and do the math. If you're going to come out way ahead, sell. If not, wait.
It has nothing to do with VALUES, but, with what type mortgage best fits your needs. OK , you do not want to over pay, and a mortgage firm would not finance more than 125% of the value of a home..,75-80% under conventional,but at least you would receive both , write-offs, and appreciation values in the 5 years.
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