The Five-Year Equity Rule?

By
Real Estate Agent with Berkshire Hathaway HomeServices Preferred Real Estate, Inc.; www.AuburnOpelikaALRealEstate.com

The Five-Year Equity Rule?

Some things get more valuable with age, like fine wines and real estate. Building equity takes time, money and luck, which is why following the five-year equity rule will help you plan when to sell your home.

When you buy a home, plan on staying there for approximately five years. Why? You’ll need equity in order to sell the home without losing money. 

Equity is your percentage of ownership VS how much the bank owns. With any mortgage loan, the first few years of payments go more toward paying interest than reducing your principal. To build enough equity to sell at break-even or a profit, you’ll have to recoup closing costs and fees as high as 14% in some areas. To build equity over time, do the following: 

Put more money down. If you put 20 percent down, you’re in good shape, but if you put down 3.5%, 5% or 10%, it will take longer to build equity, so be patient. 

Pay your mortgage on time and in full. Paying principal builds equity. The more months you pay, the more equity you’ll build.  

Make additional mortgage payments. You can add an extra $50, $100, or any amount per mortgage payment. This will also help you get rid of private mortgage insurance or allow you to refinance to a PMI-free loan once you reach 22% equity. 

Let time and the housing market work for you. The housing market typically rises one to two percentage points above inflation annually, but if you’re lucky, your home may gain much more value than that.  

Building equity takes time, money and luck, which is why following the five-year equity rule will help you plan when to sell your home.   

Berkshire Hathaway HomeServices Preferred Real Estate, Best Auburn Realtors, Best Opelika Realtors, Relocate to Auburn, Move to Auburn, Houses for Sale Near Me

www.AuburnOpelikaALRealEstate.com

Posted by

 

Laura Sellers

Associate Broker, Realtor, GRI

Berkshire Hathaway HomeServices 

Preferred Real Estate, Inc.

1810 E. Glenn Avenue, Suite 130

Auburn, AL 36830

Phone: 334-332-7263

Fax: 1-888-217-3682w

 

www.AuburnOpelikaALRealEstate.com 

 

TO VIEW HOMES FOR SALE IN THE AUBURN-OPELIKA AREA PLEASE CLICK HERE.

 

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Please call me today at (334) 332-7263.

 

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Comments (4)

Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

Good morning Laura. The buyer has to consider an exit strategy before they enter. They must decide the level of risk they are willing to undertake. And, five is a good number. Enjoy your day.

Apr 14, 2021 05:14 AM
Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Good morning Laura - yes do it as soon as possible.  Most wealth is generated in home ownership.

Apr 14, 2021 05:43 AM
Bill Salvatore - YVP Blog
Arizona Elite Properties - Chandler, AZ
Realtor - Valley of the Sun / golfArizona@cox.net

Just get on the Equity Train! Make it a great Wednesday and thanks for sharing.  Bill Salvatore

Apr 14, 2021 05:58 AM
Charles Stallions
Charles Stallions Real Estate Services - Pensacola, FL
800-309-3414 - Pensacola, Pace or Gulf Breeze, Fl.

I think you make your money when you purchase a home and equity is icing on the cake but in todays market maybe not so much,

Apr 21, 2021 03:48 AM