If you own a house or a flat you might be reading recent news stories about increasing demand for homes and falling rent rates, which could encourage you to try finding a buyer for your property. But before making such a major decision you should think about the various aspects of selling and what it means to exchange that for renting a property instead.
Housing market changes are encouraging some homeowners to sell
According to news reports, some property developers are reporting significant demand for new-build houses in the coming months, with an eye to an improved housing market after the coronavirus pandemic is over.
Does that mean you should think about selling your existing home and take advantage of what might be a seller’s market? When this happens there is typically more demand than supply, which in turn drives house and flat prices up. That means you could stand to make a nice profit from selling your house and live in a rental property after completing the sale. Then you would move into a rental home and pay a landlord a fixed monthly amount for rent, which would hopefully be lower than whatever mortgage payments you were making on your home.
Or you might feel like you have no choice but to sell because of your financial situation. Perhaps you can no longer afford your monthly mortgage payments, or you need a huge influx of cash. In those situations you may feel compelled to find a buyer for your house or flat. Yet doing so means you will no longer have the asset of a house to include in future financial planning.
And, as with anything in life, the decision to sell a homeisn’t that simple. There are a number of complicating factors, including: the fact that the property market can be unpredictable, what your future plans for homeownership might be, your finances, and several other issues to consider.
Scenarios when it might be beneficial to sell and rent a home instead
The home buying experts at LDN Properties have truly seen it all when it comes to the reasons why people decide to sell and move into a rental property. We had a chat with them and discovered there are a few scenarios in which it might be beneficial to homeowners to sell their house or flat and move into a rental property.
If you’ve lost your job
The coronavirus pandemic is causing massive problems for many people, including the loss of jobs. If you’verecently found yourself unemployed then you will be wondering how you will be able to pay your bills, which might include mortgage payments on your home.
Although financial advice experts suggest that people should have some type of emergency cash stashed away for such an outcome, the reality is that the vast majority of people don’t have huge funds they can tap for when they lose their job. Even if you’re able to continue paying your mortgage each month whilst unemployed or transitioning to a lower-paid job, think about the benefit of paying even less through monthly rent instead of putting it toward a mortgage.
If you have negative equity
Negative equity refers to the situation when the total value of your home is less than the amount you have outstanding the pay on your mortgage. If you are in this scenario then you might want to consider selling your house and live in a potentially cheaper home that you rent instead.
If you need to pay off a large debt
Even if you are currently making your monthly mortgage payments, you might have accrued a significant amount of debt and find yourself struggling to also pay the monthly minimum instalments for those accounts. If that’s the case, selling your house or flat can be a good way to quickly free up a large amount of money that you could use to pay off the debt.
Still, it’s worth considering the fact that a home is a top financial asset and could increase in value in the coming years. Think about whether there are other options for tackling the debt, including a change in jobs or reducing unnecessary household expenses.
If you’re ready to retire
Another reason why some people decide to sell their properties and move into rental homes is because they are either at, or near, retirement age. Selling your home at this time can be a great way to avoid having to pay any more property insurance or taxes.
And you’ll get to avoid the stress of homeownership that includes having to make time-consuming and expensive repairs to your property, because the burden for such fixes will fall on the landlord. But if you do decide to shift from owning a home to renting, be sure to get renter’s insurance to cover your personal possessions and other items.
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