Millennials are ready to break the golden rule of home-buying

Many young home-buyers don’t think it's possible to save up for a 20% down payment

National /
Feb.February 08, 2020 12:00 PM
Home buyers have for decades been advised to never put a less than 20 percent down payment on a house, but 70% of young home-buyers are willing to break that rule this year (Credit: iStock)
Home buyers have for decades been advised to never put a less than 20 percent down payment on a house, but 70% of young home-buyers are willing to break that rule this year (Credit: iStock)

Add the 20-percent-down-payment rule to the list of norms millennials are tossing out the window.

Around 70 percent of millennials said they would put down less than 20 percent of the price of a home as a down payment this year, breaking a rule of thumb that’s stood for decades, according to Business Insider. More than a quarter said they’d put down less than 10 percent, which was almost unheard of in their parents’ generation.

It’s not surprising that it’s an appealing option. It could take a renter in a high-cost city like Los Angeles nearly a decade to save up enough money for a 20 percent down payment on a home in their city.

Some agents are advising their clients not to wait, arguing it’s better for a homebuyer to get their foot in the door now and start building equity rather than wait to save up for a 20 percent down payment. It could all work out for a buyer if their home quickly increases in value.

Putting down less than 20 percent means homebuyers will have to pay private mortgage insurance — a monthly payment on top of a mortgage that’s usually between 0.3 percent and 1.2 percent of the home’s value.

But that payment is automatically cancelled once a mortgage’s loan-to-value ratio hits 78 percent or lower, which can happen if a home value increases enough. Still, appreciation could slow in the future and either way, a lower down payment means higher monthly payments.

Regardless, it seems many home-buyers don’t see much of a choice. [Business Insider] – Dennis Lynch


Related Articles

arrow_forward_ios
(iStock)
Southern California housing rush was unabated in January
Southern California housing rush was unabated in January
Orange County, CA (iStock)
SoCal home sales prices and volume surge
SoCal home sales prices and volume surge
Affirmed Housing CEO James Silverwood and the development site (Affirmed, Google Maps)
Affordable developer proposes complex in Chatsworth
Affordable developer proposes complex in Chatsworth
Homebuyers across Southern California continue to gobble up properties
SoCal homebuying surge bumps up against low inventory
SoCal homebuying surge bumps up against low inventory
Southern California home sales rose 27 percent in July compared to June
SoCal surge: Home sales rose 27% in July
SoCal surge: Home sales rose 27% in July
City Ventures CEO Mark Buckland and a rendering of one of the townhouses
City Ventures wants to develop complex of townhouses in Commerce
City Ventures wants to develop complex of townhouses in Commerce
There were fewer deals across Southern California in June than any other year
SoCal housing market rebounds in June but still lags far behind 2019
SoCal housing market rebounds in June but still lags far behind 2019
Spencer Rascoff and Nick Daze (Credit: John Lamparski/Getty Images)
Spencer Rascoff-backed rental platform PocketList launches in LA
Spencer Rascoff-backed rental platform PocketList launches in LA
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...