Many people see buying a home as one of the rituals of adulthood. Attaining a secure job and owning your own home is often part of the plan as you get older.
If you are within the age range of 21 to 34 and own your own home, do you feel this was a good decision?
If you do, then you might be lucky.
A recent 2018 Millennial study
, conducted by Bank of the West, shows that four in 10 millennials regret becoming homeowners. A big part of the regret is often the result of where they found the money for the down payment on their new property.
The survey reports that those who drew money from their retirement accounts retroactively thought of it as a poor financial decision. Others wished they had been more prepared when purchasing, which includes putting down more money and more thoroughly inspecting the house.
Borrowing From Retirement
Is it ever a good idea to withdraw from a retirement fund to invest in real estate? Although it is doable and not the worst idea, the short answer is no.
While most 401(k) plans offer options to borrow money for a down payment on a house, rather than removing the money entirely, it definitely shouldn’t be your first option. According to Forbes.com
: taking out money—even if it's just a loan, not a withdrawal—goes against the most deeply ingrained tenets of saving for retirement (namely, “Hands off”!) ... and it can be habit-forming.
It is always a better idea to save your retirement money for retirement.
A good idea is to always talk with a financial advisor. Someone who is familiar with your financial standing can help you formulate a plan on how to save or borrow for your first home. It is possible to save for a down payment, but you may have to slightly adjust your timeline and lifestyle in the meantime.
Although all the following options may not be available to everyone, they bear thinking about in terms of long-term strategy:
- Live lean for a while and put off the idea of buying a home until you can save enough money for the down payment.
- Skip the luxuries and vow to put aside the money you would have used to pay for vacations, new cars, new furniture, etc.
- Put any bonuses you earn into the same down payment fund.
- If you get married, inherit money or accrue any other windfalls, save it for your new home.
- Look for less expensive “starter” homes and work with an agent to make the best investment you can. You can always make a plan to upgrade in the future.
Our goal at KBT Realty
is to make sure that, as a first-time homebuyer, you are confident and satisfied with the decision to become a homeowner. Our agents are always happy to talk about the different options available to you and can also provide references for trustworthy financial advisors.
Whether you decide to borrow from your retirement fund or not, don’t try to figure it all out yourself. Let us use our expertise to help you find a home that doesn’t break the budget and fits in with your future financial plans.
With a mortgage background stretching over the course of eight years and several years of experience in the Real Estate industry, Tyson Emery has proven that he gets the job done. His Real Estate career has allowed him the privilege to work with several clients, which has consistently landed him in the top one percent every year. As an owner along with Kirk Pugh and Becky Brown, KBT Realty has continued to grow by providing an environment to agents that concentrates on training and personal growth. Their philosophy is to figure out what you are good at and help you become great.