A recent Urban Institute study shows that homeowners who purchase a house before age 35 are better set for retirement by the age of 60. Within the data set, the Institute surveyed homeowners who turned 60 or 61 from 2003 to 2015.
This is what they found:
“Today’s older adults became homeowners at a younger age than today’s young adults. Half the older adults in our sample bought their first house when they were between 25 and 34 years old. And 27 percent bought their first home before age 25.”
Early-life homebuyers beat later-life homebuyers as they enter retirement
The Urban Institute also asked homeowners how old they were when they bought their first home:
- 50 percent of homeowners were from ages 25 to 34.
- 27 percent of homeowners were younger than 25.
- 12 percent of homeowners were from ages 35 to 44.
- 11 percent of homeowners were 45 and older.
This study highlights the major impact of purchasing a home earlier in life. The homeowners who bought their first house before they turned 25 had just $10,000 on average remaining on their mortgage by age 60. And the 50 percent of homeowners who purchased in their twenties to early thirties had about $50,000 remaining, though it’s important to note that these buyers typically purchased more expensive houses.
Compare this to the homeowners who purchased later and had less opportunity to build equity over time. Homeowners in the 45 and older age group had an average of over $62,000 left on their mortgage as they neared retirement.
Lately, housing experts have been expressing concern that the millennial homeownership rate, for adults ages 18 to 34, is significantly lower than previous generations within the same age bracket.
But the Urban Institute’s study results may motivate millennials who are on the fence about buying their first house or signing another lease:
“As people age into retirement, they rely more heavily on their wealth rather than their income to support their lifestyles. Today’s young adults are failing to build housing wealth, the largest single source of wealth, at the same rate as previous generations.
While people make the choice to own or rent that suits them at a given point, maybe more young adults should take into account the long-term consequences of renting when homeownership is an option.”
Finance experts also say that millennials can build up to 40 times more worth by buying instead of renting. We’re at a time when we’re experiencing historic levels of housing affordability. It hasn’t been this affordable to buy a home since 1985.
Lovin’ this loan program for first-time homebuyers
You can buy a house with a low or no-down-payment and still build wealth at the same time. FHA loan limits recently increased. This loan program is friendly to first-time buyers and could allow you to get a bigger house without a bigger down payment. If you’re looking for a home loan you’re going to love for the long haul, find a local loan officer, find out if you qualify, and find out how you can get home in 10 days.
For educational purposes only. Please contact your qualified professional for specific guidance.
Sources are deemed reliable but not guaranteed.
Cornerstone Home Lending, Inc. and its affiliates do not provide financial planning, tax, legal, or accounting advice. This material is for informational purposes only. It is not intended to provide, and should not be relied on for, financial planning, tax, legal, or accounting advice. You should consult your own financial planning, tax, legal, and accounting advisors before engaging in any transaction.