The 5 Year Rule

Congratulations on your new home! The closing negotiations are finished, the keys are yours, the boxes are unpacked, and your name is now proudly displayed on the mailbox. Buying a home is a major milestone in a person's life, we are so happy for you. You have worked hard to get to this moment, so make sure you celebrate. If you worked with us, thank you for being one of our valued clients! We look forward to a long-lasting professional relationship with you.

As you get more settled on your new turf, you are going to start feeling one of two ways. First, you may understand, potentially for the first time ever, the age-old adage of 'home sweet home.' You will be able to breathe easy knowing this is where you have landed, looking forward to many, many years at this property. Or, you may already be thinking of what comes next. Perhaps this home is a good fit for now, but not your forever fit. If this is the case, what comes next?

If you are already planning your next move, someone has likely warned you of the 5 Year Rule. The 5 Year Rule is the theory that you should not buy a home unless you are going to stay there for a minimum of five years. The reason is that in those first five years of living in a new home, you're not really earning equity from the property. Yes, you are making mortgage payments. However, these payments amount up to covering interest charges. Unless you are making larger mortgage payments than outlined, selling before the first five years is up could lead to you barely breaking even, or even taking a massive loss in funds. Another reason to give a home at least five years is that, simply stated, moving is a huge process! Why do it more than you have to?

You should not buy a home if you don't plan to live in it for at least five years. However, if you do, whether you need to for whatever reason, or you already have, or you simply want to, here is what we recommend: do not max out a mortgage and invest every penny into this very temporary living space. Buy exactly what you need: no less, but definitely no more. Save any extra money to use a down deposit on the next home, and make sure you purchase something that will easily sell when the time comes. 

It will take some strategic planning, but you can get away with not following the five year rule if you are smart about it. Let us help! Contact Ken Richter today at 403-630-6363 so we can discuss your options and come up with a game plan. 

Posted by Ken Richter on


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