Been thinking of downsizing? This actually could be a good time to put those thoughts into gear. Especially right now, selling and buying a lower priced home in an “Up” market can be to your advantage. See, the advantage is to maximize the sales price on your existing home and replace it with a less expensive one.
Maybe you have some future goals. Maybe your current home just doesn’t meet your needs the way it once did. There can be multiple reasons you might be thinking of moving down (downsizing). Making a move can allow you to “re-balance” the equity in your home to better reach your future goals.
Today’s market – the “up” market, maximizes the sales price you can expect to receive, and it will free the equity in your home. A lower priced home will result in reducing your housing costs with lower property taxes, insurance, utilities, and maintenance…while improving your liquidity position.
Reinvesting the proceeds of the sale is not required. However, you may wish to do so. You may decide to get an 80% loan-to-value mortgage on the replacement home to get the best interest rate and avoid private mortgage insurance. What does that do you may ask? This would allow you to put the excess proceeds into an income producing or growth investment, start a business, fund an education, buy a second home, take a spectacular trip, gift a down payment to a relative, or any other different projects.
I’m sure you’ve heard of “borrowing other people’s money”. Let’s face it, most of us have done that at some point in our lives. The expression “other people’s money” describes borrowing money and using it to invest with the expectations of earning more than the rate you’re paying. Mortgage interest is one of the most attractive ways to borrow money because it is generally the lowest rate compared to other types of loans while having the option to get a fixed-rate mortgage for up to 30 years. Most other borrowed funds involve short terms and floating interest rates.
One way you can consider when investing part of the funds could be rental real estate.There is a shortage of available rentals which has caused rents to increase like homes have appreciated. Single family homes for rentals provide large loan-to-value mortgages at fixed interest rates for long terms on appreciating assets with defined tax advantages and reasonable control not found in many other investments. For more information, download our Rental Income Properties Guide.
Homeowners who have owned and occupied their principal residence for two of the last five years are entitled to exclude up to $250,000 of gain for single persons and $500,000 of gain for married persons filing jointly. For more information, see IRS topic #701.
Contact your real estate professional to find out more information like potential sales price, what net proceeds you can expect to receive on a sale, available replacement homes, and the types of mortgages and rates available.
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!