Millennials are buying homes at a much later age than their parents. While homeownership remains a social standard of stability and success for many people, trends among Millennials show they are drifting away from the traditional ways of homeownership and opting for smarter and more sustainable elements in their houses.
Why Is It So Hard To Buy A House As A Millennial?
The main reason most Millennials have been locked out of the property market is the steadily rising price of houses.
One would have to save about 20% for a deposit to get a loan approval. The average Millennial home buyer takes years, even decades, to save that much. As people try to save for their desired house, prices steadily increase, and often the home remains out of reach.
Increasing student debt, unemployment levels and costs of living, unwillingness to get married and tighter lending criteria are also preventing many young people from making the leap to homeownership. Many are choosing to move back into their parents’ houses or preparing to rent for the rest of their lives.
Even so, there are still many Millennials who want to invest in the housing market. Here are the top 5 home buying tips for Millennials, to help you improve your chances of homeownership.
1. Stick To Your Budget
Buying a house is one of the most expensive purchases you will make in your lifetime. While house hunting for your future home, you might come across various properties with the desired facilities and features you want in your dream house. The more options you have, the more important it is to stay objective.
The prices of houses are rising by the day, and you might easily be tempted to buy one that is too much for your planned budget, especially when you see that you can afford the mortgage repayments.
If you are buying a house for the first time, find a house with a mortgage you can comfortably afford. If you have enough left after the repayments, redirect it towards other financial goals, such as retirement or your children’s education funds. The value of your home will probably increase in a few years and you’ll be able to draw equity from it and reinvest in a larger property if you want.
2. Grants And Benefits
Most Millennials are buying their first home. If this is the case for you, keep an eye out for grants and other benefits for first home buyers that are available in your state/region.
There are schemes for grants and assistance such as the first home owner grant, first home buyer assistance scheme and the homebuilder grant. The first home buyer grant, for example, provides up to $10,000 to encourage Australians to buy or build a new residential property.
Under the First Home Loan Deposit Scheme, you can gain approval for your first home loan with as little as 5% for deposit and not pay Lenders Mortgage Insurance. Thoroughly scan the grants, assistance, and benefits available so you can save thousands of dollars and own your dream home sooner.
3. Try The Rentvesting Strategy
Many young people spend a vast sum of money yearly to rent a property in an area that is suitable for their lifestyle. While you might dream about owning a house in the expensive area where you are renting, the extremely high prices might make it look like buying there is not an option.
What you may be missing is that there are many areas, usually in the suburbs or outside the city, where you can more easily afford to buy.
Rentvesting is a home-owning strategy where you buy an investment property in an area within your budget while renting a property to live in that’s right for your lifestyle. Many people have used this plan to buy their dream house.
If you can secure your 20% deposit for a property and buy in an area with potential for growth, there is a high chance that you will be able to get positive cash flow from the property in a few years.
With rentvesting, not only do you enter the property market sooner, you can also save a deposit for your next property or dream house more rapidly.
4. Buy A House With Your Friends
Joint tenancy refers to a legal arrangement where two or more people jointly own a piece of property. You can buy the property together with anybody else – possibly your friend, mother or business partner – and share equal rights and responsibilities. You don’t have to be married to own a property together.
Many Millennials are buying properties with their friends. The most common arrangement involves each friend building a small house on jointly owned land or owning one floor in a duplex or triplex house. It all depends on how you design the arrangement for each parties’ convenience.
After all, what would be better than owning a house and being neighbors with your friends at the same time?
5. Get Yourself A Mortgage Broker
It is a common misconception that it is cheaper to get a loan on your own than using the help of a mortgage broker. In fact, you can usually get the services of a mortgage broker free. Many mortgage brokers work on a commission basis with banks and lending institutions and you don’t have to spend a penny on them.
A mortgage broker knows which lender is most suitable for your circumstances and will direct you towards the best mortgage option for you. If you are lucky, the brokers might be able to get lenders to waive various expenses, such as application and origination fees, based on their long-term relationships with banks. This can make your home loan process faster and easier, as well as saving you thousands of dollars!
If you are looking to enquire about your home loan options, call us at 1300 889 743 or fill in our free enquiry form to speak to one of our Home Loan Experts mortgage brokers.