Homefinder logo

The Five-Year Rule: The Right Time to Sell

Article_2_65
May 15, 2019

For many, buying real estate is an investment. Like any good investment, there is an appropriate amount of time to sit on something before selling. Even if you’re living in the home, if you’re hoping to make money off its sale in the future, you need to pay attention to trends and bide your time.

So, what’s the ideal time to stay in a home before selling?

The five-year rule

While rules are made to be broken, the five-year rule can be used to guide you towards making good financial decisions. Within five years you will have paid down a significant amount of your mortgage, building up equity. You’ll be in a much stronger position to sell at this stage.

You have to look at how much interest you’re paying versus the principal, what the terms of your mortgage are, and how quickly you’ll be able to pay it off. If you sell too soon, you will lose your equity – or worse, lose money. The closing costs alone are reason enough to stay put for at least five years.

But I have to move!

Yes, there are situations that arise that will force you to sell and move sooner than five years. A new job in another city, a divorce, or family emergency are just a few reasons why you would need to sell earlier. In these cases, you might just have to absorb the loss. You will also want to sell fast. Portable mortgages allow you to transfer your current mortgage to another property – but be aware there are often terms and limitations.

If you want to sell sooner than five years on purpose – like to flip it – be mindful of how much you spend on the house. Houses suitable for flipping need to be in an inexpensive, up-and-coming neighbourhood. If you pay a lot for a house that you don’t intend to keep for long, you may end up losing. House flipping can be controversial for that reason. Do it only if you know you can increase the market value of the home significantly. You will be investing not only in the house but also all the renovations.

It’s always a good idea to work with a reputable real estate agent and mortgage broker when looking to buy a home. You can talk about your plans and where you see yourself in five or more years.

Similar Articles

July 17, 2019
It is usually one of the biggest and most expensive decisions you’ll ever make in your life. READ MORE...
July 17, 2019
When the tiny home trend began, it was a way for people to afford housing, adopt a minimalistic lifestyle, and save on utility costs. READ MORE...
July 10, 2019
Whether you’re building a deck, extending your patio, or adding lighting, there are things you need to consider before any shovels hit the ground. READ MORE...