Interesting CNBC.com article a few days ago on how 70% of young millennial homebuyers “regret” buying their home.
That’s truly sad. It’s a huge purchase, and not one that can be easily or cheaply undone.
So what’s turning what should be one of the happiest occasions of their lives into a major case of buyer’s remorse?
These millennials, and others we’ve worked with, have made 3 classic homebuying mistakes. Here’s how not to fall into the same traps they have.
Mistake #1. Raiding retirement accounts to come up with the downpayment. One-third of millennial homebuyers have dipped into their retirement accounts to finance the home purchase. When asked about this by our younger clients, we always warn “Don’t do it.” First of all, there’s a reason these are called “retirement accounts” and not “homebuying accounts.” The purpose is to pay for retirement. If you raid the accounts now, the money won’t be there later. (And hate to break the news, but saving for retirement won’t get easier once you’ve got a house and kids). Secondly, there is almost always a tax hit when you take money out of retirement accounts.
Mistake #2. Underestimating ongoing costs. Just like in the CNBC article, we see far too many young homebuyers biting off more house than they can chew because they neglect to factor in ongoing costs like real estate taxes, homeowner’s insurance, maintenance, utilities and repairs. It’s hard to convince young buyers that air conditioners do break, pipes do leak, and because we’re in Florida, trees do fall on your house (thank you, Hurricane Irma!). The pricier the home, the more costly the upkeep. In our area, we advise earmarking 1% of the home value each year for repairs. You may get by a couple of years on the cheap, but sooner or later you’ll get hit with a big bill. Typical killer expenditures here in Florida? Replacing a roof, installing hurricane protection or impact windows, and funding costly assessments in high-rise condos. Oh, and the air conditioner is guaranteed to go bust when the in-laws are visiting and it’s sweltering outside.
Mistake #3. Buying too much house. We all agree. A house is important, and you want to feel truly at home there, but it’s just a house. It’s not a life. We see too many young couples focused on buying the perfect house, with the belief that once inside, they’ll live the perfect life. Young buyers may be tempted to buy way too much house, and those big house expenses can leave them house poor and focused on material stuff rather than quality of life. Lesson? Your first home doesn’t need to be your “forever home” so don’t sweat the imperfections.