If you've ever considered keeping your current home as a rental, and using this "buyer's market" to get into your dream home, 2012 will be the time to seriously consider it. There are a lot of factors indicating that this is probably a wise decision if you have the means. Below are just a few things to consider:
- I'm not going to lie - it's a tough market for selling your home. By keeping it, you could take advantage of market timing. I don't always recommend trying to anticipate or "play" the market (usually it's best to make decisions on what's right for your family, not by RMLS and NAR data), but in this case, you may be able to buy in a low market and wait several years for a small recovery before you sell.
- Due to the recent decrease in home ownership in the past couple of years, the demand for rental property is at a high. I think it's a sad predicament - that housing is both difficult to find and at a premium. Moving out of your first-time home and adding a well-kept property to the rental pool might help both parties - renters and investors - in this climate.
- The Federal Reserve announced Wednesday that it anticipates keeping the federal funds rate low through 2014. While these inter-bank interest rates don't immediately affect consumers, they do eventually influence the interest rates consumers pay on their home loans. The challenge is that interest rates are higher for loans on investment property. However, if you've lived in your primary residence for a year or more (check the fine print on your loan terms), you may be able to keep your current loan in place and still take advantage of primary home rates on your new property.
If you'd like to explore whether this option will work for you, it's usually best to start by speaking with a lender. The two of us can work together to help you figure out if there is enough equity in your home and if there are mortgage options for this approach to work for you.
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