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Can I Sell My Home After 5 Years If I Have a Mortgage?

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For some people, owning a house is a dream…but paying the mortgage can be a nightmare. So selling one’s home is an option many homeowners make. This is true especially when the owner cannot keep up with the dues or pay on time.  While some homeowners stay in one place for many years despite the mortgages they pay, you have the liberty of selling your property anytime even after just five years. But what if you still have years left on your mortgage to pay? Can you still sell it? Before you decide on that, this article can help you determine if the choices you make can affect the value of your property in the future.

Here’s a Good Tip

Staying in your house for a minimum of 5 years is a good decision. This means that you have covered most (if not all) of your mortgage payments while a little of it goes into principal. This basically means you have no equity over the course of five years and if there are some left, it would be less than expected.

6 Things to Consider Before Selling Your Home

Before you decide on selling your home, you need to consider a few things first. Knowing what these are can affect the value of your home and if it will be beneficial on your part in case you have plans of selling it after five years. Here’s what you need to know:

  1. Taxes – as law requires it in the United States, selling a property or asset means you have to pay the capital gains tax especially if you see any potential gains from it. While this is applicable to all houses, you can find a way to lessen the capital gains tax. This can be done if the house you are selling is also your primary residence. The owner should have at least lived there for more than two years to lessen the tax in it. Depending on which state you are living in, property taxes may also vary. So you need to check on that first and understand what laws are in place regarding selling a property.
  2. The House’s Amortization – if you have financed your home through borrowed money through a lender or a bank, there are interest rates added on to that number. This means you have to pay off the money you borrowed thus far prior to selling your home. While selling your house at equal to the same amount you owe sounds good, you need to sell it more than its value so you can also cover any fees you have. If the interest loan is fixed, reducing the principal is ideal but keep in mind that fixed interest loans must be paid off over the loan term. This could be a problem if the interests are high during the time you purchased the house as you might still owe some of the money you loaned for your home.
  3. Know the Penalties of IRS – whenever you sell a property, it is important that you consider the penalties given by the IRS so you can avoid paying it in the future. For example, if you are selling your home for profits then you must report to the IRS as capital gain and if you have sold your home less than the actual value of it then you must also declare a capital loss. If the house is solely owned by one person or by a couple, capital gains may also vary. In case you experience a loss in the sale; the bank can help you write that off. However, they will provide you a Cancellation of Debt form or what they call a 1099-C. This form should be reported on your tax returns. Again, always check with your state or country as these could differ depending on the situation you have.
  4. Consider the Equity – keep in mind that the equity of your house can drop or rise anytime depending on the prices in the housing market. If your home’s value increases, you can pay off your loan and may even have enough money left to buy a new house again. However, if the market goes down, your house may also lose its value. In case this happens, covering the residual balance may come off your pocket since the mortgage balance exceeds your house’s value.
  5. The Short Sale – short sale can be applied if you already owe more than the actual value of your house but failed to pay the residual balance. This is a type of transaction wherein your lender will allow you to sell the home less than what you actually owe. While this sounds like a good deal, it can have negative long-term impacts that are vital to be aware of. This deal will likely have a poor impact on your credit score in the future. Let’s put it this way, you took borrowed money but failed to pay it back in full. This scenario might disqualify you for another loan in the future if you decide on getting one. So if you can avoid this, do so.
  6. Look For Options to Take – sure, selling your house sounds like an easy way but this is not always as beneficial as it sounds. Before you do that, make sure that you have checked all the options out there. You can also look into federal or FHA programs that aim to help homeowners who are in a bad financial situation. There are many programs that offer their services to help people avoid foreclosures on their homes as well as reducing their payment on mortgages. Programs like the Principal Reduction Alternative can also help you reduce the amount you pay on your entire loan so you don’t find yourself in distress. In any case that your situation includes relocation or changes in jobs, renting your house can also help you in a good way.

The question remains, can you sell your house after 5 years if you have mortgage? Yes you can! You just have to make sure that the house is in good condition and there are no heavy damages that could hurt the value of your property. Make sure that you also attract the right kind of broker and motivate them to help you sell your house. This means working with an experienced and trusted broker so you can at least get some of your investment back. It’s always a good option to take if you ask me.


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