Key Takeaways
- A recent survey found that 64% of millennial homebuyers regret purchasing their homes.
- There are several things that factor into homebuyer’s regret.
- It’s important to purchase a home with your eyes wide open and know the true costs that come with owning a home.
Remember Mr. T’s catchphrase, “I pity the fool!”? Well, this may come to mind when it comes to homebuying and you hear the acronym PITI which stands for principal, interest, taxes, and insurance. It’s how you pay a mortgage and into an escrow account, and it tends to be a lot more money than renting.
Ironically, a survey by Bankrate revealed that there may be a bit of self-pity, or buyer’s remorse, that millennial homebuyers are feeling these days. As discussed in a recent Yahoo Finance article, 64% of millennials who have recently purchased a home are regretting their decision to do so, largely due to the costs involved.
If you’re considering purchasing a home, make sure you understand all the costs before buying. One common issue is that people end up paying more than what they’d budgeted. For example, consider the downstream effects of paying an extra $20,000 on a $250,000 home. That extra $20,000, for which you’ll have to pay principal and interest, would cost an extra $84 per month, if you have a 30-year mortgage at 3% interest.
That may not sound like a huge amount, but the bigger issue is that, on a $250,000 home, that extra $20,000 is almost 10% more. How long does it take for the market to appreciate, to allow that to grow? Three, four, five years? Those are additional years you’ll need to live in the house in order to get your money back.
Another issue is that it costs, on average, 2% of the value of the home for annual maintenance. For a $250,000 home, that’s $5,000 per year, or $400 per month. This is a cost beyond PITI.
The lesson here is to look at the regrets of homebuyers and ask yourself if you’d experience the same regret. Add up all your expenses and make sure you’re going into homebuying with your eyes wide open. That way, instead of a pity party, you’ll be confident knowing you’ll be throwing a celebratory party in that new home. Until next time, enjoy.
Gary
If you’d like to read more on this topic, here are a few of Gary’s previous posts that you might enjoy:
5 Money Changes When Buying a Home
Pay Extra Towards your Mortgage or Put more Towards Your Savings
