Perhaps you’re like me and noticed that your property value has increased significantly since the beginning of the pandemic. This may entice you into thinking about selling your property. If you’re considering selling right now the good news is that we’re still in a seller’s market. The bad news is that the housing market has started to cool down in most regions, so you probably have a small window in which you can get top value for your home. Before you finalize your decision to sell we have a few factors that you may want to consider.
Should I Sell My House?
The first factor to consider is that once you sell your property you will have to buy another home. I know you’re thinking duh, but getting max price for your house today means paying top price for your new home tomorrow. So, how do you know if it’s worth it? For starters if you don’t have any equity, then you probably should not be looking at selling your home. If you don’t have any equity you should only sell if you simply can’t afford your home or if it was just a terrible investment. As a rule of thumb, you want to make sure you have enough equity to cover the down payment on your next property. Moreover, you have to consider if you’ll be able to afford a house that allows you to maintain your current living standard.
The next factor to consider is the current interest rate. There is a direct correlation between your monthly mortgage payment and your interest rate. In other words, the higher the mortgage interest the higher your monthly payment. The current average mortgage interest rate is between 7-8%. This means that if you purchase a home for $350,000 you’ll pay about $2,400 per month. This is much higher than the pre-pandemic rate of 3%. According to banking industry experts, it’s expected that interest rates will come down significantly in the next few months, especially with the decline of the banking industry. Given that interest rates are likely to decline it may be worthwhile to wait before buying your new home.
The best option for now may be to sell your home to take advantage of the high value, then lease a place until interest rates and home values come down. We typically don’t advocate throwing money away in renting, but it can be a strategic short- term play.The key is not to waste the money gained from the sale, so you’re prepared to make your next down payment. We suggest that you use only a small portion of the equity towards your new home and save the rest to put towards your retirement.
Finally, in this article I assumed that you are going to sell your house to buy another. If you are currently renting my perspective is that there’s never a bad time to buy a home to start building equity. In this market it’s essential to do your due diligence and search for a good price. Don’t worry too much about the interest rate, as long as you can afford the mortgage, you can always refinance to a lower interest rate later.
