The stay-at-home orders that were issued across the U.S. in 2020 resulted in a lot of homeowners thinking about how nice it would be to have a larger home to accommodate all the activities that are now taking place in their current home. This is especially evident with homeowners who have children at home taking classes for school or have multiple generations living in the same house.
For other homeowners, it is a pro versus con for selling their larger home and downsizing to a smaller home. The advantages could be very appealing to homeowners for very different reasons. Smaller homes are easier to maintain, have lower utilities, home insurance, and property taxes.
Other things homeowners are considering is convenience and mobility in a single-level home. Or being located closer to the activities that they are now able to do. Or getting a newer home that needs less maintenance and updated to be more energy efficient.
A married taxpaying couple who has owned and occupied their principal residence for two years can exclude up to $500,000 in capital gains. A single taxpayer can exclude up to $250,000. There could be multiple benefits to liquidating the equity in their home without a tax liability.
With that equity earned, a home seller may choose to pay cash for their next replacement home. Or they may choose to put down 20 percent to avoid the PMI and get a 15-year loan with a lower rate. Maybe they would like to invest the balance of their equity in a product with a rate higher than their new mortgage. Or maybe keep a reserve fund of cash for the unexpected crisis that can happen at a moment’s notice.
Other options are funding your child’s or grandchild’s education, wedding, or taking that once in a lifetime trip around the world. Maybe you would like to start a business or give a cash sum to the charity you support.
There will be expenses incurred from selling a home and purchasing another one. Purchase costs can be as much as 1.5 to 3 percent and sales expenses can be 2.5 times that much.
Regardless of what your motivation is for moving, now is the time to do it. With low inventory in most markets, homes are selling very quickly and in a lot of cases in less than a month. Typical winter months usually mean less activity and less competition. But then we still have historically low-interest rates. As of 1/21/21, the 30-year fixed rate was 2.77 percent, and the 15-year rate was 2.21 percent.
As this would be a major life-changing decision, I recommend that you take your time to consider all the possible alternatives and outcomes. I can provide you information that can be valuable in your decision process such as a home value, what you will net from a sale, and give you a list of alternative properties for the next stage.
I can provide Insider Information on Fairfax VA homes for sale. Get you a FREE Market Snapshot Report of Your Northern Virginia Home’s Value, or Search All Northern Virginia Homes For Sale. Put that data you need at the tips of your fingers!