When most home buyers break into the market to purchase their first home, they usually aren’t looking for their forever home. Many first time home buyers get what they refer to as their “starter home,” a home they purchase to build equity in order to buy their dream home later.
If you’re looking to trade in your starter home for your dream home, it’s important to look at how much equity you’ve built over the time you’ve had your home, and whether it’s enough to get back into the market and afford the home of your dreams.
The five year rule
The five year rule that is generally accepted is that you shouldn’t buy a home unless you plan on staying for at least five years before selling it and buying a new home. This five year period will allow for your home to gain equity and to appreciate in value.
When you’ve purchased a starter home, it can be difficult to stop looking at finding a your next, better home, but patience is key. This isn’t by any means a hard or fast rule — but if you’ve lived in your home for five years, it’s likely that you’ve built up enough equity in your home that you can start looking for your dream home.
Play the waiting game
Watch the market closely. If the value of your home hasn’t gone up, wait it out as much as you can. Consult with realtors who know the market and can tell you whether your property value will go up, and when the best time to sell will be.
Prices in areas of Canada like the GTA and Vancouver have risen dramatically. Niagara has been going crazy, too. If you play the waiting game right, your property value is very likely to go up.
Build up your equity
Other than simply waiting, there are other ways to build your equity on your home. One way to increase your equity in order to sell your home and make a profit enough to buy your dream home is to do your best to put as much money down as you can. If you put 20% of your mortgage in a down payment on the house, you’ve probably got enough equity to sell your home and break even.
It also can be helpful to make additional payments on your mortgage. Whether it’s an extra $50 or an extra $500, accelerating the payments on your mortgage will help you build your equity. If you’ve been able to do this over time, you should be in a good position to walk away from your home sale with the ability to purchase your dream home.
Find a Better realtor
Get started working with a better realtor, someone who knows the market and will be able to tell you if now is the time to get into the market and be able to afford your dream home. Better Homes Niagara is a team of real estate experts who can help you assess the market and see if it’s the right time for you. Connect with us today and get started on finding your better home.