What’s the Five Year Rule for Buying a House?

When you purchase a house, the general rule is that you want to be sure you’ll be in the same location for at least five years. Otherwise, you’re probably going to take a hit financially.  It’s also like many things in real estate; the Five Year Rule is not a hard and fast one.

It may not be readily apparent to you, but there are two major financial factors that can have an effect on your bottom line.

  1. Closing Costs

The first hit is your closing costs.  Every time you sell and you buy there are closing costs involved that are come out of your pocket. Depending on what you agree upon with the seller or the buyer, you will have to pay some or all of the closing costs involved in the transaction. This can amount to thousands of dollars in expenses that will add up over time.

  1. Interest

And you take a second hit when you look at your mortgage statement to see exactly where your monthly payments are going. The way mortgages are structured, you pay much more interest in the first few years you own a house. It is not usually until you have past the five-year mark that you really start making any progress in paying down enough principle on the home to make it a better deal than renting.

Exceptions to the Rule

Five years is a generality. If you add in a couple of other factors, you can make buying a house that you don’t plan to stay in long-term a better choice.

Making Additional Payments

There are several ways that you can pay off your mortgage more quickly. If you apply some creative accounting by paying bi-weekly instead of monthly, make additional payments, or pay more than what is due toward your principle each month, you can potentially find yourself in the green on your purchase more quickly.

When you go to purchase your home, think about where you expect to be in five years and make your buying decision based on that. Planning on adding to your family? Planning to make a career move? Take these potential life events into account to ensure you’re purchasing a home that will suit your needs for years to come.

Whatever your mortgage needs, our experienced mortgage professionals would love to sit down and discuss your needs. We look forward to hearing from you!

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