Pro Tip: Consider Your House Purchase A Five-Year Commitment

If you’re thinking of buying a home, the financial side of the equation is probably foremost in your mind. After all, buying a house is likely the largest single financial transaction you’ll make in your lifetime. However, there’s another important consideration, too, and that’s the time commitment you’ll need to make in order to keep your finances healthy over the long-term.

A majority of homeowners, and especially first-time buyers, will likely have plans to upgrade or move in the future, typically for more space or better work and personal opportunities. However, if you move too soon, you risk losing money on the transaction– possibly a lot of money.

The mortgage industry structures loans in such a way that, in the early years, your monthly mortgage payments are largely going toward paying interest only, leaving the principal balance on your home untouched. After the five-year mark, however, you’ll see more of each monthly payment applied to the principal you owe on the home. At this point, it generally becomes safe to assume you have enough equity in the home to ensure you won’t lose money by selling the property.

Every buyer’s situation is unique, of course, and consulting with your mortgage lender or other financial professional can be beneficial if you find yourself needing to sell sooner than anticipated. Although the so-called “Five Year Rule” is a good benchmark for making sound real estate decisions, there may be options on the table that suit your particular situation.

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