Not Your Parents’ Mortgage: How the Millennial Mortgage Experience Differs

Updated: Apr 23, 2020

We are now at the stage where the baby boomers are starting to retire and downsize and millennials are coming in to take their place in the housing market. Whether it’s buying older homes or starting off in fresh builds, millennials are following in the footsteps of their property-rich parents. That being said, the market is a very different place from when the baby boomers started to claim their hold in the world of real estate. Things have changed dramatically, but this is in both good and bad ways. Let me show you how. The good: For one thing, interest rates are much lower. When baby boomers were entering the market they were dealing with double-digit fixed-rate mortgage levels. While today’s rates aren’t as low as they were in 2012, they remain at a much more manageable rate level (below 5 percent).

Of course, this lowered rate has heated up the real estate market, increasing demand and competition. So you might not see it as a fully positive change.

Millennials also tend to be more knowledgeable about the process, thanks to the internet. They know the language and aren’t walking into the process blind.

The bad: Millennials are entering the real estate market already saddled with debt. The cost of an undergraduate degree has risen dramatically (160 percent) since 1980 and this generation is saddled with enormous debt. Studies by the Federal Reserve Bank of New York found a direct correlation between rising tuition and declining homeownership. Add in the fact that wages are not rising along with inflation and you have a generation facing crushing debt to meet life goal points.

Those who are venturing into the market will likely find themselves in a competitive market. Real estate in major cities often see bidding wars and new buyers may find themselves constantly out-priced.

Finding the right home will take time. Be prepared for that.

The amazing: Technology has now changed the mortgage experience. This is the area that really sets the modern mortgage apart from your parents’ or grandparents’ mortgage.

Thanks to FinTech, mortgages can now be processed at much higher speeds and with lower default rates. Potential homeowners can go online and get approved, alleviating a lot of the stress involved in the application process.

By increasing access to brokers, decreasing application time and making the process more open to all applicants today’s mortgage has definitely gone through a positive upgrade.

The times are always changing and this tends to lend itself to both positive and negative outcomes. The good old days weren’t actually all good and many things have improved since your parents’ time.

So take a deep breath and enjoy the fact that you can research your mortgage options and apply for one while wearing your pajamas and sipping your morning coffee. Then sit back and anxiously await the moment you can walk through your first front door for the first time.

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