The housing market can be unpredictable. Today we are going to help you answer this question: “What if I sell my house before 1 year?”
There are several reasons why you may want to sell your house before celebrating your first anniversary in it.
Maybe you are suffering some kind of financial hardship. It’s possible the market exploded and you want to cash out your profits.
Whatever your reasons for selling may be, there is nothing preventing you from selling. Still, there are a few things that you should know.
1. You Will Probably Lose Money
Depending on market conditions, the average homeowner may lose money if they sell a home not long after buying it.
It takes time for your home to build equity. If you decide to sell it months after your initial purchase without any renovations, you will likely lose money after fees.
Of course, there are exceptions to this rule, but they are not the norm.
You will also need to pay all relevant closing fees associated with the sale.
If you find yourself in a situation where you need to sell your home in a hurry, be prepared to potentially suffer some additional losses.
2. You Will Likely Pay Prepayment Fees
You will more than likely incur prepayment fees if you try to pay your mortgage off within the first year.
Banks often offer attractive mortgages to homebuyers with the intention of earning money off of your interest payments. When you sign a mortgage, they assume that you will spend the next decade or two paying it off.
So, when you decide to pay your mortgage almost immediately, they will slap you with prepayment fees. Typically, a prepayment fee is the sum of three months of interest.
For example, if you sell your home for $600,000 and pay off your 6.75 closed variable rate mortgage, you will owe the bank nearly $10,000.
Here’s how you calculate that:
- Take the amount you want to prepay, in this case, $600,000 and multiply it by your interest rate.
- 600,000 x 0.0675 = 40,500
- Next, take 40,500 and divide it by 4 to get 10,125.
- The $10,125 total is your estimated three months of interest.
If you have an unfavorable mortgage rate, your prepayment fees could be crippling and cause you to lose a lot of money.
In this scenario, it is always best to try and transfer your mortgage to your next home or to see if the buyer is willing to take it on.
It’s Your Decision
Remember, you can always sell your home whenever you want. There is nothing that can stop you from doing that. However, if you do plan to sell your home shortly after purchasing it, expect that you will probably lose money.
If you have any questions about selling your home and how to take advantage of your real estate market, HomeLife White Rock is here to help you. We have been major players in the White Rock real estate market for many years and we are ready to help you get the best price for your house.