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Question
Hello-
I just had a question about the costs of upgrading to a new house when you outgrow your current one. We have been in our house just about a year, but feel it may be too small soon (more kids coming) and we may need to get a bigger one is a few years. We bought it for $200,000 and put $40,000 down. I am just wondering about estimated cost if we were to get a new house after such a short time. Say we found another house for about the same price or slightly higher. Would the estimated realtor fees of, say $10,000 (5% of the purchase price) and the estimated $4000 closing costs on the new house have to be paid out of pocket, or would they be part of the new loan that we get? Does having more equity in the house make the costs of getting a new home lower? We don’t have a lot of money so just trying to figure out how expensive it will be. Thanks for your help!
Hey, Lisa.
The general rule of thumb is that you should stay in your home for 5-7 years in order not to lose money on it.
Realtor fees are linked to the cost of the home. Closing costs generally are, too.
I don't know what country you're in, but in the United States right now it is going to be difficult to finance Realtor fees and closing costs as part of the new loan. Such a practice was quite common in the 1980s and even up to about five years ago, but banks and mortgage lenders frown on that practice now. In fact, under all the new financing laws that have come about during the last five years because of the Great Recession and the collapse of the real estate market, it might even be illegal.
The costs of getting a new home are lower if you have a higher down payment (equity) because the loan is lower, resulting in lower loan costs.
If you've only been in the home for a year and you put $40,000 down on that home, I would recommend staying in your home and doing some remodeling.
Hope this helps.
Russel
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Answers by Expert:
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Russel Ray
Expertise
Through home inspections, I provide an education about real estate. I'm one of those rare home inspectors who has been involved in real estate in many different capacities: as a Realtor (in Texas), as a property investor/flipper, as a teacher, and as a marketing expert (for Realtors and home inspectors). I believe that my experience as a Realtor and property investor provides me with a different viewpoint about home inspections in that I work for my Clients, but when there are other people involved in helping my Clients, then I firmly believe in helping them, too. That includes Realtors (both the seller's and the buyer's), repair professionals (e.g., plumbers, electricians, etc.). If I can get all the players (seller, seller's Realtor, buyer, buyer's Realtor, and repair professionals) playing in the same sandbox together to accomplish goals as a TEAM (Together Everyone Accomplishes More), then I believe I have succeeded in my job as a home inspector. My profession is, in my opinion, much more than simply documenting the condition of a property and then take the money and run. I am also a rare breed in that I don't believe that one inspection fits the needs of all Clients, and I have led the industry in understanding that fact. For example, the goals of a property investor are far different than the goals of someone buying a property to live in. The goals of a seller (a pre-listing inspection) are far different than the goals of a buyer (a pre-purchase inspection). To that end, I offer 14 different types of inspections, e.g., STANDARD, LIST, RENTER, BASIC, MAINTENANCE, SPOT, and more. I believe in giving the benefit of the doubt to all professionals in whatever industry they represent until they prove me wrong.
Experience
Over 42 years in all aspects of real estate--building homes, renovating homes, inspecting homes, Realtor.
Organizations
National Association of Certified Home Inspector, Better Business Bureau of San Diego
Education/Credentials
Graduate of Texas A&M University; College Station, Texas
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