Are you torn between selling or renting out your existing home? You’re not alone. With low-interest-rate mortgages, many Americans are facing this decision, especially if they are looking to buy another property. At Extreme Investor Network, we understand the complexities involved in this decision-making process and we’re here to provide you with the information you need to make an informed choice.
According to the Federal Housing Finance Agency, roughly 6 in 10 existing fixed-rate U.S. mortgage holders have interest rates below 4%, making homeownership more affordable. However, renting out your old home while purchasing a new one can be challenging. Keith Gumbinger, vice president of mortgage website HSH, explains that the process can get very complicated, which is why many people opt not to do it.
With rising interest rates and soaring home values, qualifying for a second mortgage without tapping into your original property’s equity can be difficult. The National Association of Realtors reports that first-time homebuyers typically put down an 8% down payment, while repeat buyers put down 19%. Additionally, when using rental income to qualify for a second mortgage, lenders typically only consider 75% of your proceeds.
Managing a rental property also comes with its own set of challenges. Certified financial planner Kashif Ahmed warns that being a landlord is not as simple as it seems. Many first-time landlords underestimate costs like ongoing maintenance, lower rents, vacancies, and increased insurance premiums. It’s important to weigh the stress and added expenses before deciding to rent out your home.
Another crucial factor to consider is the capital gains tax break for primary residences. Married couples filing jointly can earn up to $500,000 on the sale without owing capital gains taxes, while single filers can make $250,000. However, there are strict IRS rules to qualify for this exemption. Renting out your home triggers the “residence test,” which requires the property to be your primary residence for 24 months within the five years before the sale.
At Extreme Investor Network, we emphasize the importance of making informed financial decisions that align with your long-term goals. Whether you choose to sell your home or rent it out, our team of experts can provide you with personalized advice tailored to your unique financial situation. Making the right choice now can impact your retirement and other financial goals down the line. Stay tuned to our blog for more personalized tips and strategies to maximize your real estate investments and financial success.