You’ve been noticing things getting a little bit tighter around the house these days. Perhaps you’ve added a kid or two to your family or there simply growing up and need more space. Maybe you’ve been thinking and talking about the possibility of moving to a bigger house but, can you afford it?
The prospect of selling and moving to a larger house might give you a little bit of anxiety but understanding costs involved and whether or not you can afford it usually puts your mind at ease one way or the other. If you realize you can’t afford it right now, there are some things you can do to prepare yourself for when you can vote. But in the meantime, let’s go over some of the costs involved in moving.
If you’ve lived in your home for longer than five years chances are you have gained a good amount of equity. Home prices have definitely increased over the last 5 to 7 years and most homeowners have a decent amount of equity unless you have refinanced multiple times. Just 10 years ago, many homeowners were underwater, owing more on their home than the home was worth. We are pretty much out of that era by now, so you probably have a good amount of equity stored up on your property, especially if you had good terms on your mortgage.
One of the first things you should do is find out how much your home is worth. Take a look at similar properties in the area, visit open houses, and get a good ballpark estimate of what your home may be worth. Let’s say you owe $300,000 on your home currently. If you look around and find that other homes are selling for around $500,000, then you have about $200,000 in equity. This can make a nice down payment on another home.
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Other costs would be a selling commission and closing costs. Listing agents will usually charge about 6% commission on the sale price of the home. If you sell for $500,000, that’s about $30,000 commission. These fees are always negotiable and creative calculating on the commission can even be lower than that.
Closing costs would run you about $10,000. This means that if you sold your $300,000 mortgaged home for $500,000 less commission and closing costs, you would have $160,000 to put down on a new home. This large down payment will usually bring your interest rate down, and depending on the terms, your monthly payment may not change a whole lot.
For instance, if you have a 5% interest rate with a 30-year mortgage term, you’ll be paying about $1600 a month. If you purchased a $500,000 home with that $160,000 down payment, at a better interest rate, let’s say 4%, your monthly payment would still be right around $1600.
It’s pretty amazing what a good down payment and low-interest rate can offer you with a monthly mortgage payment. It may be much more affordable than you thought possible.
The nice thing about selling a home with equity is that you don’t have to bring any money to the table. All the money needed for selling is wrapped up in your equity and just gets rolled right into the next home.
Read More: How to Tell How Big of a Home I Need?
Give me a call. Let’s go over some of the numbers and see where you’re at. Moving up may be extremely affordable and it may be time.