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  • Ryan O.

Student Loans Will Kill You


Hawaii is paradise. There's no question about that. However, it cost a pretty penny to live in the 808 State.

The Honolulu Board of Realtors recently released July 2017's housing statistics. The median sale price for single-family homes and condominiums both increased from the same time last year. The median price for condominiums was $425,000 and the median price for single-family homes increased to $750,000.

As I meet with prospective first time homebuyers, many of them often rely on financial assistance from their parents. With home prices steadily increasing, buying a home is difficult for some millennials because many millennials have student loans.

According to the Federal Reserve Bank of New York, the number of people who purchased homes by the age of 30 dropped from 31% in 2004 all the way down to 21% in 2016 The reason? Student loans.

Interestingly, student loans was one of the main reasons why homeownership declined 35% for those between the age of 28 - 30 between the 2007-to-2015.

According to USA Today, the average student loan debt is approximately $30,000. At 6.8% interest, with a 10 year loan period, estimated monthly payments would be $345. Although $345 doesn't sound too bad, here's what $345 can do to a mortgage.

Using some rough math, at a 4% interest rate, $345/month could possibly increase a person's buying power by additional $75,000. For example, lets say a person prequalified for $300,000 with 20% down. Lets assume that person has a student loan payment of $345/month. If that person didn't have student loans, his or her prequalification could increase to $375,000.

Lets ramp up the numbers. I've talked many people who borrowed hundreds of thousands of dollars to pay for their education. Lets say you have $200,000 in student loan debt. At a 6.8% interest rate, over a 20 year period, your estimated monthly loan payment is $1,500. In terms of a mortgage, $1,500/month could qualify you for a purchase of $325,000. How's that for perspective?

-RO

#ryanoda #studentloans #homeownership #millennial

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Ryan Oda (RB-23073) is a Real Estate Advisor with Forward Realty (RB-19423) in Honolulu, HI.