Are you a “repeat” homebuyer or seller? As of October 2020, the average length of time U.S. homeowners stayed in one house before selling and buying another home reached a historic span of 10 years according to property-data solutions consultant DataTree (by First American).
While real estate professionals will give you several reasons for this lengthy trend, Benton Capital is reminding homeowners and first-time buyers to stay focused on what it means for YOU:
- As you put time and money into your home’s conveniences and upgrades, ask yourself: “Does this investment make sense if I ever sell?” Big ideas and projects have large consequences. What are you investing in your home that’s logical for your personal situation on a short-term versus long-term basis? What’s the financial ROI and emotional ROI (return on investment) for each individual project? Make sure your expenditures are commensurate with your feelings, budget, and any potential future plans.
- Don’t let routine maintenance snowball out of control. Not staying current with your indoor and outdoor to-do lists will catch up with you when you eventually consider selling your home. Repairing appliances, the roof, fences, walls, windows, doors, moldings, handles, knobs, latches, seams, cracks, holes, or other damaged or neglected areas amounts to full-time watch duty. But inching your way through these projects is much better than completely ignoring them.
- Make choices that give you the best future flexibility. You want to stay in the clear on difficult ethical, legal and financial decisions NOW so you can pivot forward in the future. Pay for that code permit on a kitchen remodel if local ordinance requires it. Think twice before adding someone to your house deed to give that individual a share of ownership. Choose wisely when deciding between a second mortgage versus a HELOC (home equity line of credit). All of these and even more choices will arise. They can have future implications.
- Keep your FICO score (credit score), debt-to-income ratio (DTI), and credit history in check. Don’t make bad financial decisions that will haunt you for years to come. Give yourself some grace, but over the long term try to keep your personal balance sheet and borrower activity in the same financial health — or even better — than when you first purchased your home.
- Be decisive in knowing whether or not to pay off your mortgage faster. Current interest rates are the lowest they’ve ever been in modern history, which means money is super cheap. Is it imperative you apply extra funds to your mortgage principal each month when it’s not costing you that much to borrow in the first place? Maybe or maybe not — just think it through.
- Always be on the lookout to refinance your mortgage when interest rates drop. Refinancing at a cheaper mortgage rate usually makes sense 99 percent of the time — a concept that’s difficult to argue against. While there are minor restrictions for some borrowers, the majority of homeowners refinance several times throughout the course of their life. Who in their right mind doesn’t want to save more money every month?
- Remember: if you ever become self-employed, it can change your underwriting dynamics as a borrower. We are not saying you should never embark on an entrepreneurial or freelance opportunity, especially if it’s a good one. However, make sure your employment options are aligned with your longer-term mobility and homebuyer/home-selling decisions. Different mortgage underwriting and credit rules apply to self-employed workers.
- Consider whether you’d ever like to rent your house to someone else. For many, this isn’t an option. But you’d be surprised who wakes up on any given morning and decides to become a future landlord. It could be you. The choice may be a great long-term investment for your personal circumstances if you can financially leverage two mortgages — a future home that you live in and your newfound “rental” that pays off over time.
- Keep a sharp eye on conditions in the local housing market and your neighborhood’s activity. How is your town changing — for the better, or for the worse? Is crime up or down in your neighborhood, and why? How are homes pricing and selling each year compared to nearby communities? Is your HOA (homeowner’s association) treating you right lately, and who is rotating on and off of the HOA board of directors? All of these and more are issues to keep tabs on.
- Always be pondering the next 5 – 10 years. There’s no telling what circumstances or opportunities will come your way, both good and bad. Your home and those living there represent the anchor in your life to so many work, education, comfort, and other choices and decisions that will arise. Each year, be cognizant of how your homelife fits into your 5 – 10 year horizon.
Benton Capital wants you to ponder these facts, as many homeowners are repeat buyers and sellers (and refinance candidates too)! The statistics don’t lie. It is important to be prepared.