To millennials, especially those living in Utah, rent forever is just an exaggeration. The second-youngest members of the labor force in the United States have not completely shunned homeownership. As of 2018, about one out of three Americans under the age of 35 own a house. They only delay this major life decision since they usually have grave financial problems to deal with.
Eventually, millennials in the Beehive State shop around for real estate listings and home loans in Provo, Utah, and other promising communities. Although they enter the property market older than their parents and grandparents were, they are not necessarily wiser.
According to a study, more than six out of 10 millennials are regretful homeowners. Here are the main four reasons why:
Getting Surprised by Unexpected Costs
The usual mistake of millennial house buyers is not knowing all of the expenses associated with the purchase. Perhaps this mishap is due to renting for a long time. Young adults are typically long-time renters, so they can be unaware of the costs outside mortgage principal and interest payments and might fail to consider the regular upkeep into the equation. Focusing too much on just one aspect of the financial side of home ownership is a costly mistake with long-term consequences.
For starters, understand that a regular mortgage payment consists of four components: principal, interest, tax, and insurance. Closing costs can increase the overall cost of borrowing too, so pay attention to the annual percentage rate, not just the interest rate. Of course, prepare your finances for regular maintenance, which is more demanding the bigger the property is.
Settling for a High Interest Rate
Not being able to snag a lower interest rate is keeping many millennial homeowners awake at night. Indebted loan applicants probably do not qualify for better deals while those with better credentials may not have realized they can haggle about the offer.
Regardless of the reason, the good news is that no homeowner is married to a high-interest mortgage forever. Refinancing provides a regretful millennial an opportunity to get a better deal should lower interest rates become available in the future.
Exploring Fewer Products
The immense popularity of 30-year fixed mortgages might have tricked millennial homebuyers into thinking that there are no alternatives. These loans usually come with higher rates to make up for the long-term security they provide.
When refinancing in the future, strongly consider adjustable-rate mortgages (ARMs). These loans are usually more affordable than their fixed counterparts, at least in the beginning. ARMs are not exactly straightforward, so learning about all of their features matters.
Buying a House
Having PSTD after purchasing a house, it is understandable why some millennial homeowners regret purchasing a home in the first place.
Home-buying and renting have their fair share of advocates and detractors, but security is the beauty of owning a property. While a house might not be the best investment vehicle, it automatically preserves wealth because every principal payment is converted to equity. In the event of continuous appreciation, a house can provide generous returns over time.
Buying a house is a gamble when done prematurely, no matter how old the buyer is. Exercise due diligence to identify and weigh the risks before pulling the trigger on it.