If you’re unsure how to go about the whole process and the potential costs that you will incur, selling your home can be fairly stressful. On average, a homeowner will spend 13 years in a home before they sell it. One of the biggest implications of putting a home back on the market directly after purchasing it is the cost. How soon can you sell a home after purchasing it?
You will need to consider things like mortgage prepayment penalties and capital gains taxes.
Why Do You Have To Sell Your Home Quickly?
Buying and selling real estate won’t make your rich overnight. There are many factors that can change the appreciation of a home, most of which depend on available housing inventory and demand within the region.
Homeowners who live in their homes for 13 years or more typically build a fair amount of equity in that home. However, as we learned in 2020, life can be very unpredictable. You may need to move after retiring, filing for divorce, or losing your hob.
The Costs You Must Consider
If you recently purchased your home, you need to consider how much money you could lose in the transaction of quickly reselling it. You could be losing a lot by putting your home directly back on the market with sunk costs and tax considerations. The fact that your home has not had the proper time to appreciate will negate or cut into any equity you’ve built.
Beyond that, you’ll have to figure out the costs for buying another home and any associated moving expenses.
Understanding Capital Gains Taxes
Capital Gains = how much you are taxed on the difference between what you pay for an asset and how much you sell it for. Capital gains assumes that you have made a profit while selling your home.
If you make more than $250,000 in profit on the sale of your home ($500,000 for joint filers), then you need to pay capital gains. This could be around 15% of your selling price, meaning a fair amount of money.
If you have lived in the home as your primary residence for the past two years, you will not have to pay capital gains. If you’re looking for an argument not to sell your home quickly, that is the best one.
Mortgage Prepayment Penalties
If you sell your home before a particular time and you still have a mortgage to pay, you may have a prepayment penalty to deal with. Mortgage prepayment penalties are 2-5% of the loan balance on average.
Lenders often charge this penalty because it is the money they would otherwise be receiving with interest payments. To see if this applies to you, you must check the clause in your mortgage.
In general, we would not recommend selling your home very soon after you buy it. However, the situation cannot always be avoided and you might be in the circumstances that require you to make that sale. It is important that you understand the costs associated with this scenario so that you can reduce your losses.