How Long Does A Home Last?
Before you take that leap and build a brand new home, you want to ask yourself how long you can see yourself living in this house. Realtors always tell you to follow the five year rule. Will you grow out of your home before that 5 years is up?
- The “expanding out” phase
The average single family home will usually stay in their home for about 13 years before moving out. First time homebuyers tend to stay in their homes for 11 years, which is four years fewer than buyers who have previously owned a home. These are families that might be look to eventually expand their family which means expanding their home.
- The “trading up” phase
Some homeowners start out with a starter home because they might not be able to afford their dream home right now. The number one key to trading up is to make sure you can afford the down payment of the new home. They ask that it be 20 percent for a conventional loan. If you have already paid the principal on your mortgage and your personal finances allow you to do so then it is okay to trade up before 5 years.
- The “cashing in” phase
Buying a home is an investment. This is where the five year rule comes in. You will need at least 5 years to build up enough equity on your home to make selling even worth it to get a return on your investment.
- The “staying put” phase
Homeowners that stay put are usually in the phase where they cant afford to trade up even though their family is expanding. This means that you have less than 20 percent equity in your home. Staying put longer could increase your financial situation in the future.
- The upgrade cycle
Most people rent and rent and rent until they think they are at a point where they can afford to take the plunge and buy a house and this cycle usually occurs every 3 years but in all reality you are actually losing money by doing this.
- The five year rule
It is a general rule of thumb given by realtors that you should plan to stay in your house for 5 years and if not, you could take a hit financially. The first two things that will take a hit are your closing costs. Every time you go through the buying process whether that is buying or selling, money is laid on the table. The second to take a hit are your mortgage payments since you pay more interest in the first few years of your home.
- Defeating the five year rule
There are a couple ways to defeat the five year rule if you want a house, but you know that you aren’t going to be staying in for 5 or more years. Try buying at the lower end of what you can buy and make extra payments on your mortgage to pay it off faster. Also consider buying a house that you can afford and that you can fix up a little bit so when it is time to sell, it will sell fast.
Are you looking to build a home? Contact us at Homestead Homes and our experts would love to help you out!