Buying a home is exciting, but for many millennials, it’s not all nesting and redecorating. In fact, a recent Hometap survey of 1,000 homeowners revealed that millennials are more stressed about paying their mortgages than any other generation.
“Millennials have a lot on their cumulative financial plates—thanks to soaring home values and corresponding large mortgages. Add in high interest rates as the icing on the cake and you can see how financial strain is hitting this demographic hard,” says Doug Perry, strategic financial advisor at Real Estate Bees in Bethesda, MD.
Here’s the good news: There are ways for millennials to alleviate mortgage-related stress and actually enjoy their homes.
Why millennials are feeling the mortgage pinch more than anyone else
According to the Hometap survey, only 50% of millennials agree that homeownership is still part of the American dream. And 16% say it now feels like a financial burden. This is no surprise when you consider today’s stagnant wages and increased cost of living.
The financial pressures many millennials are facing don’t help the situation.
“Families are expanding, creating sometimes-pressing demands for more space and a larger house. Household budgets are strained with the added costs of supporting a family and the reality of saving for future expenses including retirement is no longer in the distant future,” explains Perry.
This group has also been through the financial crisis and witnessed people they know losing their homes.
“Millennials know housing is cyclical. They have been impacted by it and are, in turn, wary of large financial real estate decisions. They aren’t convinced real estate is a good investment,” adds Perry.
The most recent data from the National Association of Realtors (NAR) shows that millennials, who used to be the largest group of homebuyers, now account for only 29%—a 38% dip from just a year ago. Clearly, homeownership is a real struggle for 29- to 44-year-olds these days.
Boomers vs. millennials — a tale of two mortgage experiences
The Hometap survey also found that millennials were more than four times likelier than baby boomers to name mortgage payments as their leading source of stress. While millennials are more stressed about mortgage payments, insurance and maintenance fees are hitting boomer homeowners the hardest.
“Millennials are stressing out over mortgages since the huge post-pandemic price spike—combined with stubbornly high interest rates (currently averaging 6.75% on a 30-year fixed)—that make financing a home even more expensive,” says Bryan Kuderna, founder at Kuderna Financial Team in Shrewsbury, NJ.
Also, any homeowners who purchased their property before 2022 have very low interest rates. As a result, they’re reluctant to sell—meaning there’s even less inventory available for millennials in the market.
“Many millennials are settling into their careers now with young families and looking to make their biggest investment ever in a forever home but are finding it cost prohibitive,” explains Kuderna.
The current housing market, interest rates, and student loan payments are making homeownership harder than ever before.
How to make your mortgage less stressful—even if your income hasn’t grown
If you’re a millennial homeowner feeling the squeeze, these tips can help reduce mortgage-related stress and improve your overall financial wellbeing:
Reassess your budget
Your monthly budget is not set in stone. If you’re struggling to pay your mortgage, it’s time to tweak it. Find areas where you can cut back and give yourself a bit more wiggle room. Maybe you no longer use that gym membership. Or perhaps you can eat at home more often or take advantage of free or low-cost entertainment options.
Explore refinancing
When you refinance your mortgage, you replace your current loan with a new one—ideally with a lower interest rate. If rates drop or your credit improves, refinancing might save you thousands of dollars over time. Speak to a lender about your options, and determine if this strategy makes sense for your particular situation.
Consider HELOCs or shared equity agreements
Both home equity lines of credit (HELOCs) and shared equity agreements can allow you to tap into your home equity to meet various financial goals. While a HELOC is a revolving line of credit you can pull funds from as needed, a home equity agreement lets you access funds in exchange for a share of your home’s future appreciation. You can take your time paying them back and give yourself a bit of breathing room.
Save for home maintenance and repairs
Home maintenance and repairs don’t come cheap so it’s a good idea to be proactive and prepare for them as much as possible. Set aside a certain amount of money each month for these types of costs, so you’re not as stressed when they do pop up.
Be honest about your lifestyle
Take the time to figure out how your lifestyle expectations compare to your financial goals. If you want to go on fancy vacations and eat out every week, it’s up to you to decide whether you’ll still be able to make your mortgage payments and save for retirement. If this isn’t realistic, you may need to make some adjustments.
