Option 1: $21,250 in down payment assistance (forgivable over 5 years) but a 7.25% interest rate on a 30-year conventional loan.
Option 2: $3,500 in down payment assistance (forgivable over 5 years) with a 6.50% interest rate on a 30-year conventional loan.
I plan to sell the house in the next 5–10 years. What’s the best way to figure out which option is better given my plan to sell? Any advice would be greatly appreciated!
To figure out which option is better, we’d need to know the loan amount. The down payment assistance can have more or less impact depending on how much the house costs.
Uma said:
To figure out which option is better, we’d need to know the loan amount. The down payment assistance can have more or less impact depending on how much the house costs.
That makes sense! The loan amount is $200,000, by the way.
You might want to use a buy vs rent calculator to see how long it would take to break even with ownership costs, like interest and selling fees. If you’re only planning to stay for 5 years, owning might not make sense unless the numbers work out really well.
@Whit
Thanks for the suggestion! I qualify for some first-time homebuyer grants, so I don’t necessarily need the assistance but figured it could help. My plan is to sell and upgrade in about 5 years. Those calculators seem helpful for long-term scenarios, though!
@Riley
That’s great to hear. Just remember, those calculators can show you how long it’ll take to break even based on all costs. If you only stay for 5 years, you want to make sure you won’t lose money overall.
Zephyr said: @Whit
Interesting point. I’ve personally moved every 5 years or so, so that timeline doesn’t strike me as unusual.
That’s fair, but keep in mind it can be tough to break even in just 5 years, especially with higher interest rates and selling costs. The housing market doesn’t always guarantee big gains in that timeframe.
Bailey said: @Whit
That $21k in assistance could help a lot with breaking even, though.
True, but the higher 7% interest rate offsets that benefit somewhat. Plus, we’d need to see how the monthly costs compare to the OP’s rent and other factors.