If you’re looking to buy your first home you’re probably a millennial, between the ages of 22 and 37. A recent study released by RBC Economic Research in February revealed that Canada has the greatest percentage of homeowners under 35 of any country. More than 40% of homeowners in Canada are in this age group and in Calgary the number skyrockets to 50.6%.
Yet many of these new homeowners have regrets over their recent purchase. Depending on the survey anywhere from 51% to 70% of millennial homeowners express remorse over their homeownership status. Making your way to purchasing your first home can be complicated and stressful on its own, but reaching your goal at the end of the road with a bad taste in your mouth just makes it worse. What went wrong for these dissatisfied buyers and how you can you avoid the same pitfalls?
Many new house hunters are educated enough to get a pre-approval before they start go shopping. This is an application that tells them how much a lender may be willing to loan them for a mortgage. Having this number in hand helps potential buyers to narrow down their options within the market and choose a home they can afford. Many bright eyed and bushy tailed buyers have closed on a home they thought was perfect, only to find out after the fact that the mortgage was just one cost they needed to plan for.
The biggest regret millennial homeowners have is not knowing about all the extra bills a house would have. These include things like property taxes, home insurance, and municipal fees like water, sewage, and garbage removal. Most buyers anticipate seeing an increase in utilities like heat and electricity, but they often don’t realise just how much more they’re going to end up paying. The best way to find out how much you’ll need to plan on spending to live the house you want to buy is to have your realtor ask the current owners what house related bills they pay and how much they have paid over the last 12 months. Once you have this number in hand you’ll be able to add it to the cost of your mortgage payment and create a realistic budget.
Another set of expenses new millennial homeowners often don’t plan for is regular maintenance. This includes things most renters don’t have to worry about, like buying a lawnmower, having the ducts, carpets, or gutters cleaned, paying for a plumber, and so on. Experts suggest that homeowners plan to spend 1% of the cost of their home on maintenance each year. For example, if your house cost you $400,000 you should expect to spend $4,000 each year on upkeep. If you don’t spend it one year set it aside for years to come. Many expenses won’t break the bank but a few, like replacing the roof, a new fence, a major renovation, or broken down appliances will put a dent in your wallet if you aren’t prepared.
The next expense many new homeowners regret not planning for is renovations recommended by the home inspector. Half of homeowners say they spent more than they intended on planned renovations. Some buyers even go so far as NOT getting an inspection before they close the deal. This often doesn’t lead to any major issues but the risk is high. A quick internet search will show you just disastrous the damages can be if you didn’t have a good home inspector come in and do their job first. Broken water pipes, rotten floorboards, a damaged roof, a poor foundation, the list of possibilities is endless. Don’t take the risk. Spend the money on a home inspection.
One way to make sure you’ve got a way to pay for irregular extra expenses is to keep some money on hand. One regret millennials have is spending all their savings on the down payment, leaving themselves high and dry when it comes time to make repairs or get the tools they need to keep their house running. Give yourself some buffer room by holding on to some of your savings.
Aside from the financial regrets about their homeownership status, millennials have other regrets. The number one complaint new homeowners have about the house they chose is that it’s too small. For one reason or another, some homeowners aren’t happy with the home they chose. To help limit the chances of this happening, make a list of must-haves in the home you buy. Be realistic. Find out what you really NEED in your home and which items are really ‘wants.’ Tell your realtor what is necessary and what can be compromised.
Another major regret millennial home buyers have is choosing a home they love in a neighbourhood that leaves something to be desired. This can happen when you don’t know the community very well before you buy. Maybe there’s a train that runs nearby or there are noisy neighbours. Sometimes the location is great when you buy but later developments change the atmosphere, like the construction of a new shopping district or waste management facility. It can also happen when the area works for your present lifestyle, but is no longer suitable when that lifestyle changes. Maybe the pedestrian locale was ideal as young single person, but not as accommodating years later should your preferences change or your family grow. When choosing your neighbourhood take into consideration what life might look like 5, 10 or even 15 years down the road.
Another interesting and yet incongruent statistic is that according to a bankrate.com survey, among dissatisfied millennial homeowners 79% of them still feel that owning a home is an integral part of the American Dream. It’s no stretch to believe that a similar sentiment exists among Canadian millennials. So, to better increase your chance of happiness and thereby decrease the risk of regret, make yourself an educated buyer by doing all the research you can into just how much a home will cost and exactly what kind of home you want.