Refinancing student loans is the most obvious way to encourage more millennials to buy homes. But if we want more millennials to buy homes, policymakers need to expand credit and access to capital. But if these are the only ways to help more millennials buy homes, what about the rest? Is there anything else policymakers can do? Read on to find out!
Refinance student loan debt
The cost of college has tripled in the past 15 years, and millennials are experiencing the effects. The high cost of tuition leaves many millennials strapped for cash and unable to save for a down payment. Unfortunately, student loan debt is the leading barrier to home ownership, keeping a quarter of millennials from owning their first homes. With the rise in student loan debt, millennials need to know their options to become homeowners.
The NAR is recommending that borrowers refinance their student loans. Doing so can help students afford to make big purchases and make wise life decisions. Refinancing student loans also provides an opportunity to extend tax preferences for student debt assistance and even for debt holders to qualify for tax forgiveness. The NAR has been collecting data on the impact of student loan debt on future homebuyers for eight years.
Increase access to credit
Recent research has shown that Millennials are pursuing homeownership at higher rates than other generations. The gap between the median incomes of Millennials and Gen X is smaller than that of Millennials in the Super Prime risk tier. Yet, the income gaps between the generations still affect affordability. In order to reduce these gaps, lenders should increase access to credit for millennials to become homeowners.
The Millennial generation has not embraced credit cards as readily as previous generations. According to Bankrate, only about 33 percent of millennials have credit cards. However, they do have a growing appetite for installment payments. These plans typically have low interest rates, but may charge late fees. To feed this growing demand, FinTech companies have stepped in. Last year, Square launched an installment plan option. In addition, companies such as Affirm and Afterpay have begun offering financing for purchases over $150.
Promote social capital
In many American cities, housing prices have skyrocketed, and millennials are struggling to save enough money for a down payment. Nearly half of households headed by a millennial are rent-burdened, meaning more than 30% of their paycheck goes to the landlord. But, even if the housing market is difficult and wages are not as high as in past decades, most millennials still want to own a home. The implicit social value of homeownership is still present, but not as strong as it was decades ago.
søk is in jeopardy because they are delaying homeownership. For a child or spouse, delaying homeownership now will affect their ability to build wealth in the future. It will reduce family resources after parents’ retirement, which will weaken the economic stability of future generations. If more Millennials delay homeownership, the economic impact on these younger adults may not be seen for decades.
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