{"id":15254,"date":"2018-01-29T01:00:22","date_gmt":"2018-01-29T06:00:22","guid":{"rendered":"http:\/\/www.zoocasa.com\/blog\/?p=15254"},"modified":"2023-04-03T10:31:50","modified_gmt":"2023-04-03T14:31:50","slug":"is-it-worth-it-to-sell-your-home-before-five-years","status":"publish","type":"post","link":"https:\/\/www.zoocasa.com\/blog\/is-it-worth-it-to-sell-your-home-before-five-years\/","title":{"rendered":"Is It Worth It to Sell Your Home Before Five Years?"},"content":{"rendered":"

There\u2019s an old adage in real estate known as \u201cthe five-year rule.\u201d<\/p>\n

Simply put, it states that it takes at least five years to acquire enough equity in your home to make it worthwhile to sell at a profit.<\/p>\n

But in hot regions such as the Toronto<\/a>, Vancouver<\/a>, and Hamilton real estate<\/a> markets, some owners may be tempted to try to cash in early.<\/p>\n

Here\u2019s a breakdown of the costs that will eat into your potential profit.<\/p>\n

Real Estate Fees<\/h2>\n

As the seller, you\u2019re responsible for paying the cost of both your listing agent\u2019s real estate fees and<\/em> the buyer\u2019s agent. The fees are typically about 2.5 per cent each, but even if you manage to negotiate that down to a combined 4 per cent, the commission on a $500,000 home works out to $20,000. The commissions on the current average price for a detached home in Toronto exceed $50,000.<\/p>\n

In order to earn top dollar, most sellers invest a bit of money in their home prior to putting it on the market. These can include painting and other renovations, hiring a home stager, and paying for a pre-sale home inspection.<\/p>\n

On top of that, you have all the other closing costs such as lawyer\u2019s fees (roughly $1,000), the cost of title insurance or a property survey, hiring a mover or renting a truck, admin fees for setting up new accounts for utilities, and buying new appliances and furniture to use in the new home.<\/p>\n

Enjoying our content? Subscribe to our free<\/em><\/strong>\u00a0weekly newsletter<\/em><\/strong><\/a>\u00a0to get Canadian real estate market insights, news, and reports straight to your inbox.<\/em><\/strong><\/p>\n

A Taxing Situation<\/h2>\n

Unless you\u2019re planning on selling your home and becoming a renter, you\u2019ll also have to buy a replacement dwelling. Buyers are responsible for paying the provincial land transfer tax (LTT). In Ontario the LTT is calculated on a sliding scale based on the sale price of the home. It starts at 0.5 per cent on the first $55,000 up to 2.5 per cent on any amount over $2 million. If the home is located within the City of Toronto, there\u2019s a matching Toronto Land Transfer tax at the same rates.<\/p>\n

Related Read: How Real Estate Taxes and Fees Differ Across Markets
\n<\/a><\/strong><\/p>\n

You can use this calculator<\/a> to figure out precisely what the LTT would be on your dream home, but using a $1 million home as the base, you\u2019ll shell out an additional $16,475 on Ontario LTT and another $16,475 if the Toronto LTT is applicable.<\/p>\n

As a first-time home buyer you may receive a rebate covering much of this cost but there are no rebates on subsequent purchases.<\/p>\n

Mortgage Matters<\/h2>\n

The type of mortgage you signed up for can also have a significant impact. If your mortgage is \u201cclosed\u201d you\u2019ll have to pay penalties \u2013 usually the equivalent of three months\u2019 worth of interest \u2013 to wrap up the mortgage.<\/p>\n

You\u2019ll also be back to square one in terms of your interest-to-principal ratio. As any homeowner should be aware, mortgage payments are heavily weighted to be mostly interest in the early years, tapering off to being mostly principal by the end of the full 25- or 30-year mortgage term. If you break a mortgage within the first few years you\u2019ll have barely made a dent in the total principal owing.<\/p>\n

You will avoid both these scenarios if your mortgage is considered transferable (or portable), meaning you can simply transfer it to your new home.<\/p>\n

It All Adds Up<\/h2>\n

When you see a neighbour\u2019s house selling for tens of thousands of dollars more than you paid for your comparable home just a couple of years ago it can be tempting to try to cash in.<\/p>\n

But you need to add up all the costs of buying and selling to determine if it\u2019s really a worthwhile move.<\/p>\n","protected":false},"excerpt":{"rendered":"

There\u2019s an old adage in real estate known as \u201cthe five-year rule.\u201d Simply put, it states that it takes at least five years to acquire enough equity in your home to make it worthwhile to sell at a profit. But in hot regions such as the Toronto, Vancouver, and Hamilton real estate markets, some owners […]<\/p>\n","protected":false},"author":49,"featured_media":15256,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jnews-multi-image_gallery":[],"jnews_single_post":{"subtitle":"","format":"standard","video":"","gallery":"","source_name":"","source_url":"","via_name":"","via_url":"","override":[{"single_blog_custom":"","sidebar":"","second_sidebar":"","share_position":"","share_float_style":"","post_date_format":"","post_date_format_custom":"","post_reading_time_wpm":"","zoom_button_out_step":"1","zoom_button_in_step":"1","number_popup_post":"1"}],"image_override":[{"single_post_thumbnail_size":"","single_post_gallery_size":""}],"trending_post_position":"","trending_post_label":"","sponsored_post_label":"","sponsored_post_name":"","sponsored_post_url":"","sponsored_post_logo":"","sponsored_post_desc":""},"jnews_primary_category":{"id":""},"footnotes":""},"categories":[1158,1165,113],"tags":[],"class_list":["post-15254","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-expert-advice","category-other","category-selling-your-home"],"yoast_head":"\nIs It Worth It to Sell Your Home Before Five Years?<\/title>\n<meta name=\"description\" content=\"There\u2019s an old adage in real estate called \u201cthe 5-year rule", saying you need 5 years to acquire enough equity in your home. 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