Whether you’re a first-time home buyer or you’re thinking about moving to a larger Chicago home or Chicago condo, the five-year rule is a good one to follow. It’s a simple question of how long you plan to stay in the home, and the answer can help you decide whether or not you should stay where you are or make the move.
For some, it has everything to do with the upgrade cycle. You purchase a smaller Chicago condo or townhome with the intention of staying there. Then, a few years later, you realize there’s not enough space and you need something larger. This upgrade cycle usually repeats itself until the buyer finally settles into a house that is big enough for their family. While great in theory, if you continually sell and purchase a Chicago home that quickly, you’re not allowing yourself enough time to make money, and there’s a good chance you may lose some.
So, back to the five-year rule. When you purchase a home, a good rule of thumb is to plan to stay put for at least five years. This will help you recoup things like your closing costs, since each time you go through the closing process, money is on the table. It’s always a good idea to minimize the amount of times this sizable amount of money changes hands, and using the five-year rule is one way to make sure that happens. Another place you’ll take a hit? With your mortgage. Mortgages are set-up in such a way that you pay more interest in the first few years you own a home. Typically, it’s about the five-year mark when you have paid enough towards the principal of your mortgage to make selling and buying again worthwhile.
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