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Buyer's remorse

Buying a home is usually the biggest purchase a family ever makes, but with so few options available to buyers it's no surprise how difficult it can be to find the perfect dwelling. A whopping 90% of millennials have regrets about their first home purchase, according to Clever Real Estate’s 2024 Millennial Home Buyer Report, up from 82% the previous year. These include a bad location (27%), bad neighbors (26%) and elevated mortgage rates (25%).

Rosalie admits she’s part of that final cohort.

“I feel like it’s way too much money and I’m having a bit of remorse,” she said.

Last year, she and her husband sold their first home to buy a bigger property. Now, they’re paying $4,000 a month for their mortgage. That’s 40% of their $10,000 combined monthly income.

Although they clearly qualified for this mortgage, Warshaw believes they should have resisted the temptation to max out their purchasing power.

“They want you to spend, spend, spend because they get paid off that,” she said of banks and mortgage brokers.

In fact, Warshaw claims she and her husband were once approved for mortgage payments up to 50% of their combined income and decided to turn down the offer.

Luckily, Rosalie and her husband have avoided all forms of consumer debt. Their vehicles are fully paid off, they have no student loans and no credit card debt. Besides the mortgage, one of their biggest expenses is child care for their three-year old, which amounts to $150 a week.

Their relatively strong financial position gives them the opportunity to consider two potential solutions to their housing issue.

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Two potential solutions

Warshaw and Coleman both agree Rosalie is overpaying for her home. They believe her monthly mortgage payments should be no more than 25% to 30% of her family’s monthly income.

However, they have different solutions to get there. Coleman recommends selling the home and downsizing. This is despite the fact that closing costs could chew into Rosalie’s home equity.

“Take the hit and you get out with very little stress,” he said. “Learn from this and move on.”

Warshaw, however, prefers keeping the home and boosting income. The closing costs are unnecessary, in her view, if Rosalie can make her monthly payments more manageable.

“If you can make it work for a year, stay, if you can’t put food on the table get out,” she said.

Rosalie was leaning toward Warshaw’s solution, since her lack of debt made the mortgage more manageable. She also claims her husband’s second vehicle could be sold for $15,000 to cover some of the expenses.

If Rosalie and her husband are in as stable a financial situation as she claims, they may be able to stick it out for a while longer and kick the can a little bit down the line.

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Vishesh Raisinghani Freelance Writer

Vishesh Raisinghani is a freelance contributor at MoneyWise. He has been writing about financial markets and economics since 2014 - having covered family offices, private equity, real estate, cryptocurrencies, and tech stocks over that period. His work has appeared in Seeking Alpha, Motley Fool Canada, Motley Fool UK, Mergers & Acquisitions, National Post, Financial Post, and Yahoo Canada.

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