If you’re a millennial, you likely aspire to buy a home someday, according to results from the Bank of the West 2018 Millennial Study.
But if you’re a millennial who already owns a home, the survey also reveals that you might have experienced regrets about purchasing your house or found yourself generally unprepared for the responsibilities of homeownership.
Over two-thirds of millennial homeowners surveyed said they had regrets about purchasing their homes. And millennials surveyed were over six times more likely than baby boomers to conclude that their home was “not a good financial investment.”
If that describes your experience, there’s no need to panic. You have options — even with a hefty mortgage. And if this survey makes you worried about diving into homeownership, we have some tips for you.
What the survey found
The Bank of the West survey paints a picture of millennials who are eager to grow up and prove they can make it on their own.
For example, the number of millennials surveyed who own a home (42%) was nearly identical to the number who rented (46%). And the millennials surveyed were nearly four times more likely to own a home than to stay with their parents (or other family members).
However, the survey also reveals that millennials might be rushing into one of the biggest financial decisions of their lives, as evidenced by the fact that 68% of millennials expressed regrets about buying their home.
The top regrets among millennial homeowners surveyed include:
- 20% find damage to the house after they move in
- 20% regret how costly the house is to maintain
- 19% wish they had paid a larger down payment (which can result in lower monthly payments and interest rates)
- 19% say the space doesn’t work well for their family
- 18% feel stuck in one place
- 14% say homeownership is too much responsibility
- 13% say they feel stretched too thin financially
- 13% say their home is not a good financial investment
Overall, 32% of millennials from the survey say they have no regrets about homeownership.
What can we learn from this survey?
Although homeownership certainly has its perks, it’s important to wait until you’re financially prepared for such a commitment and understand the responsibilities that come with homeownership.
How large is the commitment? According to the Federal Reserve Bank of New York, U.S. consumers held more than $8.9 trillion in mortgage debt in the first quarter of 2018.
That’s a large number. So to put it in context, we analyzed just over 13 million U.S. Credit Karma members who had a mortgage in June 2018 and found that they owed an average of $185,526 in mortgage debt. As for millennial members within that group, they owed an average of $184,818 in mortgage debt.
What can you do?
We applaud millennials for moving out of their parents’ places and into their own homes. But it’s important to make sure you have a degree of financial stability before you dive into a down payment and mortgage.
Here are a few tips to point you in the right direction.
- Start an emergency fund that you can tap into if something goes wrong with your home. If you have a hard time saving, consider tossing your tax refund or the bonus you get from work into this account.
- Save up enough money for a 20% down payment. Just because you can get a mortgage with a lower down payment doesn’t mean you should. The Bank of the West survey found that almost 3 in 10 millennials surveyed who bought a home pulled money out of their retirement savings to finance their purchase. If you can’t wait to save for a 20% down payment on your dream house, consider downsizing to a more affordable starter home.
- Don’t forget to create a budget for non-housing expenses. You don’t want to put so much money toward your monthly mortgage payments than you can’t afford to pay for groceries or set money aside in your savings account.