When considering whether you should purchase a new Brooklyn home, you want to take into consideration the five-year rule. Thatâ€™s the minimum number of years many experts believe you need to own a home in order to break even on it when you sell it.Â Some experts are now suggesting seven years, but in this article Iâ€™ll be talking about the five-year rule.
What happens if you own your Brooklyn home for less than five years? Often, youâ€™ll lose money because:
1.Â Â Â Â Â You pay thousands of dollars in closing costs each time you buy property. That money does not build equity or increase the value of your home in any way.
2.Â Â Â Â Â In the first five years of your home loan, a much higher percentage of your monthly mortgage payment goes toward interest than toward paying down the principal of the loan balance.
How do you beat the five-year rule?
1.Â Â Â Â Â Purchase a property you intend to fix up and rent it out at a rate equal to or higher than the mortgage payment.
2.Â Â Â Â Â Buy towards the lower end of what you can afford, and make extra payments to pay down the principal.
Why own for five years minimum?
2.Â Â Â Â Â The five-year mark is where you typically start to build equity in your Brooklyn home.Â
3.Â Â Â Â Â Rental prices continue to rise; eventually your mortgage payment could be less than a rent payment.