Although millennials hope to own a home one day, many say the down payment is their biggest barrier when it comes to purchasing one, according to the latest Country Financial Security Index.
Fully forty-six percent of millennials and forty percent of Americans overall cited affording a down payment as the greatest financial barrier to homeownership, with the second most cited reason for Americans overall being that rent is more affordable (18 percent).
“Purchasing a home is much more than paying for a place to live; it’s a major investment of both time and money,” said Doyle Williams, an executive vice president at Country Financial. “Homebuyers should look beyond the initial cost of the down payment to the expenses of maintaining and protecting a home before making the investment. Some may not think it’s worth the cost and effort at this time in their lives, but for many, owning a home is worthwhile.”
Although the down payment continues to be a barrier for most Americans, it’s not stopping them from purchasing a home. In fact, many Americans reported making small down payments to afford their homes.
More than half of Americans (54 percent) reported putting down 10 percent or less of their mortgage loan on a new home purchase, while one in three (36 percent) said they put five percent or less of their mortgage loan on their down payment.
When it comes to age, millennials are the most eager homebuyers of the bunch. They are even the most likely to purchase a home in the next one to two years when compared with other age groups: 18-34 (21 percent), 35-49 (6 percent), 50-64 (6 percent), or 65 and older (5 percent).
If given $25,000 tomorrow, more millennials (26 percent) would rather put this newfound money toward a down payment for a new home or pay off a mortgage than use it to pay off their credit card debts (17 percent) or student loan debts (16 percent). By contrast, most Americans between the ages of 35-49 would rather pay off their credit card debt (33 percent) or invest it (20 percent).
While buying a home is a priority for millennials, other age groups have different concerns. Most Americans aged 35-49 selected paying off debt (67 percent) as their greatest priority, while those aged 50-64 selected retiring (72 percent). For the majority of Americans overall, paying off debt is a top concern.
Home ownership is a top priority for most millennials, but the stark reality is that two-thirds of homeowners are still working to pay off their mortgages.
Eleven percent of Americans say that 40 percent or more of their salary goes toward their monthly mortgage payments, while one in five American renters (21 percent) claim to spend 40 percent or more of their salary on rent.
Almost half of American renters (47 percent) say they believe a mortgage payment would be less expensive than their rent, but 24 percent admit they have no plans to purchase a home within the next four years. This discrepancy potentially stems from half of Americans thinking it would take four or more years to save up for a down payment.
Country Financial’s Security Index also found that many Americans are working to pay off their mortgage into retirement age. In fact, more than one in three Americans are still doing so after they turn 65 years old (33 percent). Nearly seven in 10 Americans ages 50-64 are paying off a mortgage (68 percent), and eight in 10 Americans ages 49 or younger are as well.
“It’s important for those nearing retirement to consider how much home they need for their lifestyle, and how much maintenance they’re willing to take on,” continued Williams.
Nonetheless, only about six percent of American homeowners regret or somewhat regret purchasing a home, suggesting that despite the extensive time it can take to pay off a mortgage, Americans still feel that it is a worthwhile investment.