Let\u2019s dig into the details of each step and figure out, once and for all, if you can afford to move out.<\/p>\n
Step 1: Figure out your current expenses.<\/h2>\n
Before you decide whether you can afford to move, you need to figure out your baseline housing expenses. This number should include your current housing payment with property tax and insurance, utility bills, and all other housing expenses you have.<\/p>\n
From here on out, we\u2019re going to use a couple \u2013 Jim and Betty \u2013 as an example. Jim and Betty own a 2,000 sq. ft. home worth $180,000 and have a monthly payment of $1,200. The current balance on their mortgage is approximately $110,000.<\/p>\n
Here\u2019s what Jim and Betty\u2019s baseline expenses might look like:<\/h3>\n\n- Mortgage Payment (including P&I): $1,200<\/li>\n
- Utility Bills (estimated): $300<\/li>\n
- Trash Pickup: $30<\/li>\n
- Lawn Service: $50<\/li>\n<\/ul>\n
In total, Jim and Betty are forking over around $1,580 to live in their current home. Not bad, huh?<\/p>\n
To figure out whether you can afford to move, you should determine how your expenses stack up during a normal month. Once you figure out your baseline housing expenses, you can move on to the next step.<\/p>\n
Pro Tip:<\/strong> When you\u2019re estimating your current living expenses, don\u2019t forget to consider work-related costs. If you\u2019re commuting an hour to work each day, for example, you may want to include gas and time in your baseline living expenses.<\/p>\n![\"a](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2017\/03\/can-you-afford-to-move-out-calculate.jpg\")
<\/a>Source: (Mackenzie Freemire \/ Death to the Stock Photo)<\/figcaption><\/figure>\nStep 2: Estimate your new expenses.<\/h2>\n
Since you\u2019re already thinking of selling your home<\/a>, you probably have a good idea of where you want to move. Before you can determine affordability, you should crunch some numbers to reach a baseline for your new housing costs. This\u00a0cost of living calculator from Bankrate can help<\/a>.<\/p>\nIf you\u2019re buying a new home, you\u2019ll need to estimate your new mortgage payment including your new interest rate, new property taxes, and new homeowner\u2019s insurance. Keep in mind that, depending on where you move, these expenses can vary dramatically.<\/p>\n
Example:<\/strong> Jim and Betty\u2019s old mortgage payment was $1,200. That amount included $100 per month ($1,200 per year) in homeowner\u2019s insurance and $200 per month ($2,400 per year) in property taxes. Their 15-year home loan was at 3.75% APR.
\nJim and Betty have their eye on a new house with a $200,000 price tag, although they plan to use $50,000 profit from their home\u2019s sale as a down payment.<\/p>\nThe payment on their home might look like this if they opt for a 15-year loan:<\/h3>\n\n- Mortgage principal and interest: $1,110 per month<\/li>\n
- New homeowner\u2019s insurance: $100 per month ($1,200 per year)<\/li>\n
- New Property Taxes: $250 per month ($3,000 per year)<\/li>\n<\/ol>\n
New Housing Payment:<\/strong> $1,460<\/strong> per month<\/p>\nIn addition to this amount, Jim and Betty need to consider other housing costs such as anticipated utility bills, lawn care, trash pickup, security systems, etc. In this case, Jim and Betty expect similar utility bills and plan to take care of the lawn themselves.<\/p>\n
As you work through your new expenses, make sure to be realistic about how much your new living situation will cost.<\/p>\n
Playing around with a mortgage calculator<\/a> can help you determine how much your new housing payment might be.<\/p>\nMeanwhile, you can get a good idea of potential property taxes and insurance rates by calling an insurance agent in your area for a preliminary quote and checking your new home\u2019s MLS sheet for property tax information. An MLS sheet is a document that shares all of the up-to-date sales data for any particular home. While you may be able to find MLS data for any particular home using your state\u2019s MLS listing website, you can also get this type of data from your Realtor.<\/p>\n
Other questions to ask yourself include:<\/h3>\n\n- Do you have a new job lined up?<\/li>\n
- If so, how much does it pay?<\/li>\n
- Will you pay more for health insurance or medical care?<\/li>\n
- Will other monthly bills (cable, telephone, groceries, etc.) cost more or less?<\/li>\n<\/ul>\n
Make sure to look for hidden expenses (or hidden savings) resulting from your move. If you plan to move closer to work, for example, you might save money on your commute. If you\u2019re moving to a lower cost (or higher cost) neighborhood, you could spend more or less for property taxes, lawn care, trash pickup, and insurance.<\/p>\n
Pro Tip:<\/strong> \u201cLook before you leap,\u201d says CPA\/Realtor Trina Larson of Berkshire Hathaway Home Services \/ Pen Fed Reality. \u201cCompare the economy where you are vs. where you are going. Consider state income tax rates, property values, real estate taxes, vehicle taxes, and the price of consumables. Look at the other job opportunities available in the event things don\u2019t turn out as planned. \u201c<\/p>\n![\"a](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2017\/03\/can-you-afford-to-move-out-notes.jpg\")
<\/a>Source: (Ray Kay \/ Death to the Stock Photo)<\/figcaption><\/figure>\nStep 3: Estimate the costs of selling your home and moving.<\/h2>\n
Selling your home isn\u2019t cheap, and that\u2019s especially true if you use a Realtor\u2019s services. You might be tempted to skip the Realtor and market your home yourself, but that plan has drawbacks, too.<\/p>\n
While hiring a Realtor can cost 3-6% of the sale price of your home, a professional Realtor can help you recoup those costs with a higher sales price. In fact, the typical FSBO home sold for $210,000, compared to $249,000 for agent-assisted home sales in 2013 according to the Profile of Home Buyers and Sellers. Not only can a Realtor help you fetch a higher sales price, but they will also help you market your home and facilitate all paperwork for the sale.<\/p>\n
On top of Realtor expenses, you\u2019ll need to pay for:<\/h3>\n\n- Closing costs on your old home<\/li>\n
- Moving costs out of your old home<\/li>\n
- Costs related to your moving into your new place<\/li>\n<\/ul>\n
Moving costs<\/a> can vary depending on how far you\u2019re moving and how much work you can do yourself. Make sure to call around for quotes from local movers before you estimate this highly variable expense.<\/p>\nExample:<\/strong> For Jim and Betty, the cost of hiring a Realtor for their home works out to $10,800 if they pay 6% and sell for $180,000. On top of that amount, the pair plans to spend around $1,000 hiring professional movers and another $500 on new curtains and accessories for their home.<\/p>\nThey also set aside $4,000 in closing costs for the sale of their home. This money will be used to pay:<\/h3>\n\n- Transfer fees and recording fees<\/li>\n
- Title insurance fees<\/li>\n
- Attorney Fees<\/li>\n
- Unpaid HOA dues<\/li>\n
- Prorated property taxes<\/li>\n
- Prorated mortgage interest<\/li>\n
- Settlement fee<\/li>\n<\/ul>\n
While closing costs can vary dramatically, $4,000 is an estimate of what Jim and Betty might need to bring to the closing table. Obviously, you\u2019ll need an estimate of your own closing costs before you can figure out what you can afford.<\/p>\n
With that being said, Jim & Betty\u2019s moving expenses look like this:<\/h3>\n\n- Realtor fees: $10,800<\/li>\n
- Movers: $1,000<\/li>\n
- New home accessories: $500<\/li>\n
- Closing costs: $4,000<\/li>\n<\/ol>\n
In total, Jim and Betty are forking over around $1,580 to live in their current home. Not bad, huh?<\/p>\n
To figure out whether you can afford to move, you should determine how your expenses stack up during a normal month. Once you figure out your baseline housing expenses, you can move on to the next step.<\/p>\n
Pro Tip:<\/strong> When you\u2019re estimating your current living expenses, don\u2019t forget to consider work-related costs. If you\u2019re commuting an hour to work each day, for example, you may want to include gas and time in your baseline living expenses.<\/p>\n Since you\u2019re already thinking of selling your home<\/a>, you probably have a good idea of where you want to move. Before you can determine affordability, you should crunch some numbers to reach a baseline for your new housing costs. This\u00a0cost of living calculator from Bankrate can help<\/a>.<\/p>\n If you\u2019re buying a new home, you\u2019ll need to estimate your new mortgage payment including your new interest rate, new property taxes, and new homeowner\u2019s insurance. Keep in mind that, depending on where you move, these expenses can vary dramatically.<\/p>\n Example:<\/strong> Jim and Betty\u2019s old mortgage payment was $1,200. That amount included $100 per month ($1,200 per year) in homeowner\u2019s insurance and $200 per month ($2,400 per year) in property taxes. Their 15-year home loan was at 3.75% APR. New Housing Payment:<\/strong> $1,460<\/strong> per month<\/p>\n In addition to this amount, Jim and Betty need to consider other housing costs such as anticipated utility bills, lawn care, trash pickup, security systems, etc. In this case, Jim and Betty expect similar utility bills and plan to take care of the lawn themselves.<\/p>\n As you work through your new expenses, make sure to be realistic about how much your new living situation will cost.<\/p>\n Playing around with a mortgage calculator<\/a> can help you determine how much your new housing payment might be.<\/p>\n Meanwhile, you can get a good idea of potential property taxes and insurance rates by calling an insurance agent in your area for a preliminary quote and checking your new home\u2019s MLS sheet for property tax information. An MLS sheet is a document that shares all of the up-to-date sales data for any particular home. While you may be able to find MLS data for any particular home using your state\u2019s MLS listing website, you can also get this type of data from your Realtor.<\/p>\n Make sure to look for hidden expenses (or hidden savings) resulting from your move. If you plan to move closer to work, for example, you might save money on your commute. If you\u2019re moving to a lower cost (or higher cost) neighborhood, you could spend more or less for property taxes, lawn care, trash pickup, and insurance.<\/p>\n Pro Tip:<\/strong> \u201cLook before you leap,\u201d says CPA\/Realtor Trina Larson of Berkshire Hathaway Home Services \/ Pen Fed Reality. \u201cCompare the economy where you are vs. where you are going. Consider state income tax rates, property values, real estate taxes, vehicle taxes, and the price of consumables. Look at the other job opportunities available in the event things don\u2019t turn out as planned. \u201c<\/p>\n Selling your home isn\u2019t cheap, and that\u2019s especially true if you use a Realtor\u2019s services. You might be tempted to skip the Realtor and market your home yourself, but that plan has drawbacks, too.<\/p>\n While hiring a Realtor can cost 3-6% of the sale price of your home, a professional Realtor can help you recoup those costs with a higher sales price. In fact, the typical FSBO home sold for $210,000, compared to $249,000 for agent-assisted home sales in 2013 according to the Profile of Home Buyers and Sellers. Not only can a Realtor help you fetch a higher sales price, but they will also help you market your home and facilitate all paperwork for the sale.<\/p>\n Moving costs<\/a> can vary depending on how far you\u2019re moving and how much work you can do yourself. Make sure to call around for quotes from local movers before you estimate this highly variable expense.<\/p>\n Example:<\/strong> For Jim and Betty, the cost of hiring a Realtor for their home works out to $10,800 if they pay 6% and sell for $180,000. On top of that amount, the pair plans to spend around $1,000 hiring professional movers and another $500 on new curtains and accessories for their home.<\/p>\n While closing costs can vary dramatically, $4,000 is an estimate of what Jim and Betty might need to bring to the closing table. Obviously, you\u2019ll need an estimate of your own closing costs before you can figure out what you can afford.<\/p>\n<\/a>Step 2: Estimate your new expenses.<\/h2>\n
\nJim and Betty have their eye on a new house with a $200,000 price tag, although they plan to use $50,000 profit from their home\u2019s sale as a down payment.<\/p>\nThe payment on their home might look like this if they opt for a 15-year loan:<\/h3>\n
\n
Other questions to ask yourself include:<\/h3>\n
\n
<\/a>Step 3: Estimate the costs of selling your home and moving.<\/h2>\n
On top of Realtor expenses, you\u2019ll need to pay for:<\/h3>\n
\n
They also set aside $4,000 in closing costs for the sale of their home. This money will be used to pay:<\/h3>\n
\n
With that being said, Jim & Betty\u2019s moving expenses look like this:<\/h3>\n
\n