What comes first: House or marriage?
Low mortgage interest rates have some couples planning a home purchase before a wedding.
Redfin agents have noticed a trend lately; couples are putting off their wedding so that they can buy a home. The reason? Low mortgage interest rates. These practical pairs haven't given up on the idea of marriage; they just can't afford to buy a home and pay for a wedding at the same time, and interest rates are too enticing right now.
David Pollock, a real estate agent at Redfin, experienced this personally.
"I bought my house with my girlfriend in October. We will get engaged eventually, but I told her I'd rather spend the money on a house right now. I've had three clients who have made the same decision; they want to lock in a good loan now while interest rates are low," Pollack said.
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So are these couples making the right decision? Redfin decided to look at what couples could miss out on financially if they put off buying a home to have a wedding, or if you want to look at it the other way, what they gain financially if they forgo the wedding and buy a home.
First of all, we gathered some wedding statistics:
- According to The Knot, the average wedding costs $28,427, not including the honeymoon or wedding bands
- The Knot says wedding bands cost $1,126 for brides and $491 for grooms on average
- The average newly married couple spends $5,111 on their honeymoon trip, according to a Conde Nast Bridal Infobank survey (cited on Bankrate.com)
Altogether, that's about $35,000. If a couple instead used that $35,000 on a 20 percent down payment for a $175,000 home, over the course of five years the home would gain nearly $47,000 in equity, assuming an appreciation rate of 3 percent.
So if a couple spends its savings on a wedding and has to start over from scratch to save for a down payment, it could be losing out on nearly $47,000 over the course of five years.
It's not just the low mortgage interest rates that are pressuring people to buy now. The stricter mortgage lending regulations have some couples worried about qualifying for a loan while spending money on a wedding.
"I have one client – a couple – who put off their marriage so they could buy a home," said Jordan Clarke, a Redfin agent in San Diego. "They've been making some plans for a wedding, but can't put down the reservation fee for their venue until they've secured their mortgage, otherwise it could affect their credit score and would prevent them from qualifying for the loan. They're going to wait to get married until later this year."
Of course not all couples are in the same financial situation; there are some who don't have to choose between a wedding and a home; the low mortgage interest rates are allowing them to do both.
"I've seen a few couples who are engaged and planning their wedding while looking for homes. They wouldn't be able to afford to do both if it wasn't for the low interest rates right now," said Sylva Khayalian, a Redfin agent in Pasadena, Calif.
Couples who are looking for a home should check out the advice from Redfin agents and relationship expert Andrea Syrtash on what to do to avoid love and real estate conundrums: "On Love and Real Estate: 5 Ways To Lose Your Mate."
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"Buy the dip" and lock in a low mortgage rate soon, and while home prices are finally trending up! Unless you're a veteran or qualify for a USDA loan, you can make as little as a 3.5% down payment (and that can even come from a "gift" from a relative).
It's 2014. Let's face it. Couples are living together before marriage. Buy the dip, move into the home together, and make sure the relationship is right all at the same time. Rates have increased a little, but a little shopping can mitigate that. Post your loan scenario to RateBid.com. The form only takes about 30 seconds to complete, requires no sensitive information, and then the site distributes the data to over 100 lenders across the country. The lenders that believe they can approve the scenario and want your business will "bid" their rates and fees against each other, often resulting in entertaining "bidding wars" between lenders as they lower their rates and fees with management approval due to fierce competition on the site. The potential borrower who made the request remains anonymous so the end result is that borrowers are able to quickly "zero in" on the lenders with the best rates that believe they can approve a given scenario, without ever receiving a sales call. There is no "winning bidder", so the borrower may contact as many of the bidding lenders as desired, after reviewing each lender's rates, fees, experience, website, bio, and feedback rating(s).
I'm one of these 'types', I suppose. They are sort of generalizing on the reasons and I think it's situational.
For me and my fiance, it made sense to buy a home first. I spent a lot of time after the crash watching the market for the bottom. I hit the bottom in my area perfectly. If I sold today, I'd walk away covered on every penny spent thus far and more (profit.)
We're currently planning a honeymoon 3-4 times the value quoted in the article, and a wedding that costs half. Our priorities are different I suppose. Every one of our friends who spent 30k+ on weddings (and then went to disneyland for the honeymoon) regretted it. After 2 weeks in Hawaii and 2 weeks traveling Europe, a one-night party (reception) will still be just as fun (because it's the people, not the linens/flowers/place that makes it fun) and the experiences we share on the honeymoon will be hard to repeat when our traveling group (family) grows in the years to come.
Priorities my friends. For some, pulling up to a cardboard box with a 100k car is the beezneez. To each their own.