Buying a House at a Young Age – The Pros & Cons

First Time Home Buyer Tips

Buying a House at a Young Age – The Pros & Cons

December 4, 2021

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The median age of a first time home buyer has risen to 33yrs old. That’s higher than the median age has been in the past 40yrs. When it comes to buying a home, there is a lot of uncertainty among younger generations. Many young people aren’t sure if they can afford buying a home or if they are ready for such a commitment.

While there can be conflicting reports all over the industry, the overall data suggests that home buying in millennials and gen Z is increasing. Buying a house at a young age can be one of the best investments you’ll make in your lifetime or a terrible mistake that you’ll regret soon after you make it. In this blog post, we go through the pros and cons of buying a house young.

Pros of Buying a House at a Young Age

1. An Investment For Your Future

Becoming a homeowner at a young age means that you’ve achieved an important milestone in your adult life and you can now focus on other things like investments, building your family, and so on.

At the same time, real estate prices might see an appreciation. By the time you decide to sell your first house and move into a new or a bigger place, it’s possible that you will be getting a lot more in value for your house than what you bought it for.

2. Build Your Credit

Buying a house young age can have a positive effect on your credit score. It doesn’t matter whether you buy a starter home or a bigger condo. As long as you keep making payments for your mortgage on time, your credit score will rise and there are a lot of benefits to having a good credit score.

For one, if you plan to sell your house and move into another, it should be a lot easier to qualify for mortgages, granted you have high enough income.

3. Tax Benefits

Several tax advantages come with homeownership. For instance, the mortgage interest that you pay for your home loan is deductible from your annual income. Similarly, you get tax credits for owning a house, which can lower your tax liability.

With tax benefits, not only do you owe less to the government every year, but you can also expect to make considerable savings.

4. Improved Spending Habits

Owning a house forces you to become more responsible than if you were renting a place. That’s because you are now liable for not only the monthly mortgage payments but also the utilities and maintenance of the house.

The stakes involved with buying a house are a lot higher than renting an apartment. And as such, owning a house makes you a lot more conscious of how you are spending your money, which will benefit you in other areas of life as well.

Lastly, the payments you make for a rental property are to fulfill the lease signed at the beginning of the term and only go into the landlords pockets. However, the mortgage payments you make are gradually giving you more ownership of the home you are living in and eventually you will obtain full ownership.

5. Best Way To Build Wealth

8 out of 10 millionaires in America built their wealth by investing in real estate. This statistics is a reflection that buying a house can be a great way to start building your wealth early.

When you buy a house, you are creating an opportunity to build an income stream for yourself. For instance, you can start renting out the rooms of your home, which can either make your mortgage payments smaller, or cover the entire cost of the monthly mortgage payment. Even if you are breaking even, you will be virtually living rent-free while building equity in your name.

Cons of Buying a House Young

As you can see, there are several pros to buying a house at a young age. However, that does not mean it’s a good decision for everyone to make. Let’s take a look at the pitfalls of buying a house young.

1. Limits You Financially

Monthly mortgage payments, down payment, cost of utilities, expenditure on repair and maintenance – all of this can add up to become a considerable amount. For a young individual who hopes to explore and live spontaneously, becoming a homeowner can be an obstacle that leads to many financial restrictions. The liabilities that come with owning a house can make you feel stuck.

2. Restricts You To One Area

After buying a house, you can’t move to a new city on a whim or spend years in other countries. Since you have invested a huge amount of your finances into the down payment, closing costs, and mortgage payments, you most likely will have to be reserved about the amount you’re spending in general.

You can sell the house but selling on short notice might cause you to lose a considerable amount of money. You could end up right back where you started without a house and with less money than before.

3. Equity Doesn’t Grow Immediately

In the early years of your mortgage, the payments you make will mostly go to the interest on the loan rather than the principal. Equity in your house is the difference between what you owe on your mortgage and what your house is currently valued at. So, unless the property prices in your area skyrocket, you will not be able to build equity immediately. In fact, there is a possibility that property prices might fall during this period.

Is Buying A House The Right Decision For You?

The decision to buy a house young can be incredibly smart or a huge mistake. Ultimately there are a few questions that can help guide your decision:

Are you ready to settle down? Start a family?

Are you wanting to travel and explore different places or stay in one place?

Can you financially afford to buy a house? Do you have consistent and stable income?

The answers to these questions will give you a better understanding if buying a house at your age is right for you. However, you are the only person that can know what decision is best for your circumstances.