How Long Should You Live in a House Before Selling? (5 test questions)
When you first bought your home, you likely had a timeline in mind for how long you’d stay. But life doesn’t always go as planned, and you may now find yourself wondering, “How long should you live in a house before selling?”
Selling a home sooner than expected isn’t uncommon, but the decision comes with some tough factors to consider.
In this post, we’ll explore how long you should live in a house before selling, look at the scales of selling costs and proceeds, and provide a set of questions to help you decide if it’s the right time to move on.
Reasons homeowners sell earlier than planned
There are many reasons why you might find yourself asking how long to live in a house before selling. Here are the top reasons homeowners sell earlier than planned:
Finances have changed: If your income has increased or decreased, it may affect your ability or desire to stay in your current home.
Relocation for employment: A job transfer or new career opportunity might require a move to another city or state.
Need for more space: Your family may be growing, and your current home no longer meets your needs.
Need (or desire) for less space: Maybe the kids have moved out, and you no longer need as much room.
Unplanned family change: Life events like illness, a death in the family, or a divorce can force an unexpected move.
Market creates an opportunity: If property values have risen, you might be able to sell your home for a significant profit.
How long should you live in a house before selling it?
There isn’t a one-size-fits-all answer to how long you should live in a house before selling. However, most experts agree that there are a few key factors to consider, including your home equity and how long it takes to recoup transaction costs. Here are some general guidelines to help you make that decision.
The home equity meter
Building equity in your home is one of the most important factors when deciding how long to stay. Equity is the difference between what you owe on your mortgage and what your home is worth. The longer you live in your home, the more equity you typically build through paying down your mortgage and (hopefully) appreciation in your property’s value.
If you sell before accumulating significant equity, you may have little to show for the sale after covering closing costs, agent commissions, and moving expenses. Ideally, you want to have built enough equity to cover these costs and still walk away with a profit.
The 5-year rule
Many real estate professionals recommend the “5-year rule” as a benchmark. The idea is that you should plan to live in your home for at least five years before selling. This is because the first few years of homeownership are often spent paying off the interest on your mortgage rather than building equity.
By staying for five years or more, you’re more likely to have built enough equity to make selling financially worthwhile. This rule also helps ensure that you’ll likely recover the combined transaction costs (usually around 6%-10% of your home’s sale price) associated with buying and selling property.
Other timeframes to consider
While the 5-year rule is a good general guide, it’s not set in stone. For example, if the housing market is booming, you might be able to sell earlier and still turn a profit. On the flip side, if home values are flat or declining, you may need to stay longer to build enough equity to make the sale worthwhile.
Additionally, if staying in your home may ultimately create other expenses, lost opportunities, or family hardships, traditional timeframes may not apply. You’ll want to look at the bigger picture, and there are ways to improve your home-seller vantage point.
