Purchasing a home can be an overwhelming experience, especially since it is likely to be the biggest investment you will make during your lifetime.
However, more young people are taking this step earlier in life. According to TD Bank’s recent First-Time Homebuyer Pulse survey, Millennials are now the largest generation actively engaged in the housing market.
This means that more Millennials are seeing the value of owning their own home, rather than just emptying their pockets each month for rent that will never contribute to building any future equity.
Still, many Millennials may still not know about the benefits that come
along with homeownership. Those who purchase a home have the opportunity to invest their money and build equity, rather than pay a landlord. You may think that you can’t afford a mortgage payment, but by taking out a loan, you’re actually doing yourself a favor.
Making your mortgage payment is essentially the same as paying rent, except you’re putting that money back into owning a larger share of your home, instead of into someone else’s pockets. This equity is an asset on your personal balance sheet. With it, you could take out a home equity line of credit (HELOC) to pay for expenses such as home renovations or education costs, or potentially sell your home for a greater price than your original purchase and earn a profit.
Like most homebuyers, Millennials are eager to pay off their mortgages quickly. Owning a home can provide alternate sources of income to make this goal feasible. Paying a landlord to live in an over-priced apartment can become costly. What happens when the tables turn and you become the landlord?
Millennials who buy a starter home now have the opportunity to turn it into a rental property for a source of added income when they purchase their long-term home in the future. Instead of worrying about having to afford rent, why not invest in a property and rent it out to your peers?
Additionally, Millennials can look forward to the tax breaks that apply to homeowners. The sooner a home is purchased, the more years of tax advantages they will reap.
So, what type of home should you purchase? It all depends on your financial standing and the location in which you choose to reside. According to TD Bank’s First-Time Home Buyer Pulse survey, almost a quarter of millennials (24%) are actively looking to buy their first home, and 38 percent will be looking in the next one to two years.
Millennials are, understandably, conservative with their funds given high levels of student debt, but it’s important to consider homeownership as a safe and financially savvy investment option.
Meeting with a mortgage loan officer can help Millennial home buyers understand what they can afford and how buying a home versus renting one may greatly improve their financial situation in the years to come.
Guest Post By: Ryan Bailey, EVP, Retail Lending Director, TD Bank, America’s Most Convenient Bank®