Since homeowners move or purchase a new home within 5 to 7 years on average, you may be considering your long-term homeownership options. If you did not originally buy your home as an investment with dreams of immediate resale (or “flipping”), and you paid enough of the mortgage principle and have lived in your home long enough to build equity, what is your next move?

Resale

This is heavily dependent on your local market’s performance. If you purchased a home during the recent boom, chances are it may have not gained much property value, or could be declining in value. This could mean that you owe more than the home is worth, and could sell the home in your local market’s current state, but there would not be sufficient gains if you do. However, real estate is considered a long-term investment, so by waiting, you may be able to recoup losses, or at least build more equity.

If you do have sufficient equity, consider why you would be selling your home--for retirement, or just to get a bigger house with more property and financial management responsibilities? If so, is that a option you need really need?

Finally, your loan terms may prevent your resale. If your mortgage terms include a prepayment penalty, you may be paying fees greater than any gains you would obtain from the sale.

Income Property

If you have sufficient equity, you can refinance or obtain a line of credit for purchase of additional property. Your first home can act as an income-producing property from which you can obtain rental revenue while you move into a new environment.

Keep in mind that you should finance the amount you need from the equity of your first home. Many people who became amateur speculators during the recent years now have multiple properties with values now less than the price paid, and a first home in which all of the available equity has been leveraged into other underperforming homes.

You would also become a property manager, and have to deal with liability and tenant issues at any time.

Or you can stay-- you may like your home enough to not want to leave. You may have found other forms of investment. Staying is as much a viable option as taking on a newer home or managing multiple properties. After all, how much do you really need anyway?

References

Freddie Mac. Buying and Owning a Home
Freddie mac “don’t borrow trouble”, Freddie Mac. Don’t Borrow Trouble
Neighbor Works America. Realizing The American Dream