4 Reasons Millenials Should Invest in a Home


If you believe popular culture, most Millennials don't want to buy homes and would rather rent. But the numbers suggest otherwise. The National Association of Realtors found that in 2015, Millennials made up 35% of all homebuyers, up from 32% in 2014. No other age group represented a bigger percentage of buyers last year.

If you're a Millennial who wants to make the jump from renting to owning, congratulations: There are several reasons why owning a home is a smart financial move for younger buyers.

Owning a Home Is an Investment

No one can guarantee that the home you buy will have increased in value by the time you're ready to sell. But the odds are high that it will.

Just look at the most recent sales statistics released by the National Association of Realtors: The median existing-home price across the nation stood at $247,700 in June. That was up 4.8% from June of 2015, when that number stood at $236,300. This June marked the 52nd consecutive month that the median price rose.

Just remember that price increases, though possible, aren't guaranteed. Plenty of people who bought homes in 2005 and 2006, before the housing market began its crash in 2007, still owe more on their mortgage loans than what their homes are worth. Many of these homes still are worth less today than what they sold for back then.

Interest Rates Are Still Low

If you're like the vast majority of buyers, you'll need a mortgage loan to finance the purchase of a home. Borrowing mortgage money today, though, is affordable thanks to historically low mortgage interest rates.

According to the Freddie Mac Primary Mortgage Market Survey, the average interest rate on a 30-year, fixed-rate mortgage loan stood at 3.45% for the week ending July 21. For a 15-year, fixed-rate loan, that rate stood at 2.75%. These low rates mean that your monthly mortgage payment will be lower than if rates were closer to the 5% range.

You Can Build Equity

Every time you make a monthly mortgage payment, and pay down your home loan's principal balance, you build equity in your home. Say your home is worth $200,000 and you owe $180,000 on your mortgage loan: You have $20,000 worth of equity.

You can borrow against this equity, in the form of home equity loans or home equity lines of credit, to fund major home improvements, pay down credit card debt, or even to help fund a child's college education. When you are renting, your monthly rent check disappears in your landlord's bank account.

Do exercise caution, though, when borrowing against your home's equity. You will have to pay back whatever you borrow, in monthly installments. Don't add too much monthly debt to your expenses or you will feel the financial squeeze. And if you can't afford to make your monthly equity loan payments, you could lose your home to your lender.

You can boost your credit score: Your FICO credit score is a key number. Lenders rely on it to determine if you're a good lending risk. The higher your score, the more likely you are to qualify for loans and credit, and the lower the interest rate attached to these loans.

By paying your monthly mortgage payment on time each month, you'll steadily boost your credit score. Payment history makes up 35% of your FICO score.

Tax Breaks

Owning a home also comes with tax breaks each year. The interest you pay each year on your home is tax-deductible. This break pays off more in the earlier years of owning a home, because the majority of your mortgage payment at this time is interest.

Are you ready to move from renting to buying? What's holding you back?

Disclaimer: The links and mentions on this site may be affiliate links. But they do not affect the actual opinions and recommendations of the authors.

Wise Bread is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com.


/** Fix admin settings safe to ignore showing on unauthenticated user **/