2 important reasons why you shouldn’t buy a house if you are not going to live in it for a while

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If you think that now good time to buy a houseit is important to make sure that you are prepared to stay there for a while. In fact, you need to be sure to stay in the property for at least two to five years.

If you are not sure if this is the case, then there are two important reasons why you might be better off renting a property than buying it. Read on to find out what they are.

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1. Houses come with high transaction costs.

Buying a home can be costly due to closing costs you have to pay. You may be should mortgage loan paperwork fees, translation taxes, and a host of other upfront costs.

Selling a house can be even more expensive. In fact, when you sell a property, you may be forced to spend up to 6% of the value of the home on a commission split between the buyer’s real estate agent and the seller’s agent.

Due to the high costs associated with any real estate transaction, you can end up losing a lot of money on your transactions if you don’t stay in your home for a while. Hopefully, after you have lived in your home for a few years, the value of the property will rise so much that you can sell for a small profit and cover all these upfront costs.

There is another potential problem, depending on the size of your advance payment… If you sell too soon after you buy, you may not be able to get a high enough price to pay off your mortgage and transaction costs.

This is especially true because many mortgage loans tend to be structured so that you pay mostly interest up front and your principal balance does not fall off very quickly.

2. You may face higher capital gains taxes.

Sometimes it is really possible to sell real estate for a profit in a short time, especially if the housing market in your area is hot.

Unfortunately, if you have not owned your home and have lived in it for at least two of the past five years, you are missing out on an opportunity. capital gains tax rules that may apply to real estate.

You see, you can exclude profits up to $ 250,000 (or $ 500,000 for married applicants), which means the IRS won’t take its share of that money. But this can only be done if you own the house for a long time.

If you sell your home after having owned it for less than a year, you may be subject to short-term capital gains tax on any gains made. and wouldn’t get this exception. The short-term capital gains tax rate is your regular income tax rate. The long-term rate that applies after a year and a day of holding the assets is lower for most people, but obviously you can still pay more if you are not eligible for an exception because you have not owned and resided in at least two of the last five years old.

You don’t want to end up with a big tax bill or huge cash transaction costs that you can’t pay just because you bought a house and sold it too early. Therefore, before making a purchase, seriously consider whether you plan to stay in place for a while. If you don’t, then renting may be the best financial choice in the short term.

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