Chances are that if you’re looking to buy your first home you’re a millennial (someone between the ages of 22 and 37, or born between 1981 and 1996). One of the biggest rights of passage into adulthood has always been buying a house. And according to an RBC Economic Research study released in February this year, this still appears to be true. More than 40% of homeowners in Canada are under the age of 35, the highest rate of millennial homeowners in the world. In particular, in Calgary 50.6% of homeowners are millennials.
Interestingly, despite the high rate of millennial homeownership, depending on the survey, between 51% and 70% of millennial homebuyers have regrets. Making your way down the road to homeownership can be difficult enough. Reaching your goal only to have regrets is the ultimate disappointment. What went wrong for them? And if you haven’t already bought your first home, how can you avoid making the same mistakes?
Most homebuyers head into the house hunt with a pre-approval in hand and a good idea of what their budget should be. However, a pre-approval doesn’t take into account all the extra costs of owning a home. The biggest regret millennials face after buying their first home is not realising ahead of time how much their new home was going to cost them above and beyond their mortgage. They couldn’t see the big picture.
The first piece of the picture new homeowners often don’t see until after the fact is the extra expense of additional bills. This includes property taxes (and the possibility of increased rates) and home insurance. Increased utilities is often another unplanned expense. Many renters don’t have to worry about paying for heat or water. But that’s not the case for homeowners. Make sure you take a good look at what expenses you’ll be on the hook for once you own your own place. Be sure to ask your realtor to check with the current owners about how much their taxes, insurance, and utilities have cost them over the last 12 months so that you can make sure these expenses fit into your budget in addition to your mortgage.
The second piece of the picture many homeowners don’t anticipate is the extra expense of regular maintenance on their home. Experts across the board suggest that homeowners set aside 1% of the cost of their house annually to pay for upkeep. If you paid $400,000 for your home, expect to spend $4,000 each year on repairs or to take care of regular maintenance. If you don’t spend it one year, put it away with the expectation that you will need it sooner or later. A new roof can cost somewhere around $30,000, something that will take you 7.5 years to save for. Other maintenance costs include things like buying a lawnmower, renovating out of date cupboards, slapping on a new coat of paint, landscaping the front yard, replacing an old fence, or buying a new water heater or furnace after the original one kicks the bucket.
The next regret many millennial homeowners have is not getting a home inspection or not taking seriously the advice of the inspector. Even if you do plan on making renovations, make sure you stay on the safe side by over budgeting. Nearly half of homeowners say that they spent more than they planned on renovations.
Another big regret new homeowners have after realising how many extra expenses they have is that they used up all of their savings on the down payment. Leaving your bank account on empty is a dangerous move, especially if you buy a resale home and discover later on that a pipe burst and is flooding your basement, or that you need a new dryer, or that the floorboards under the carpet are rotting, or, or, or…
Aside from the cost of owning a home, buyers have other regrets. The first is settling on a house they didn’t love because their options were limited. Sometimes this happens when you don’t get approved for as much money as need to get the home you really want. Depending on the circumstances, you may want to wait until your financial profile is in a better position so you can buy the house you need. The number one thing buyers regret about the house they chose is that it’s too small. Experts suggest that you make a list of must-haves in your home as well as a list of items on which you are willing to compromise.
The next non-monetary regret homeowners have is buying a home they love in a neighbourhood they don’t. Sometimes the neighbourhood is great to start but not suitable later on. For example, living in a pedestrian part of town with a bus or train nearby, with lots of shops and bars, is great when you’re living the single life or as a young couple but not always ideal once you’ve settled down and started having kids. Are there schools nearby? What is the noise level like in your part of town? Are there parks or green spaces? Is it as safe as you’d like? Buyers should also take into consideration what kind of zoning the community has been approved for. Is a large development in the future going to leave you wishing you’d chosen to live somewhere else? Take into consideration what your community will be like 5, 10, or 15 years in the future.
Interestingly, despite the high level of buyers remorse, according to a bankrate.com survey 79% of dissatisfied millennial homeowners still believe owning a home is a part of the American dream. We can assume the same is true in Canada. In order to avoid buyers remorse when it comes to a house do your research on ALL the expenses entailed and make sure the home you choose is really the one you want.