Waiting to Wed: Couples Shacking Up Instead

Love and Real EstateRedfin 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 Pollack, 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,” said Pollack.

icon_HouseHeart_red_750x500So 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 up 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 in BankRate.com)

All together, that’s about $35,000. If a couple instead used that $35,000 on a 20% 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%) – see chart below.

financial-gains-of-home-purchase

So if a couple spends their savings on a wedding and has to start over from scratch to save for a down payment, they 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. 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,” said Jordan Clarke, a Redfin agent in San Diego.

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, CA.

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

Have you noticed this trend happening with your friends and family? Tell us your story in the comments!

Discussion

  • http://timandjeni.com/ Timothy Ellis

    The chart appears to be adding approximately $6,000 in “Financial Gain” from tax deductions after five years.

    The mortgage interest paid on a $140,000 loan would be just $5,932 in the first year and about $100 less each year (at today’s 30-year fixed rates of 4.27%), for a total of about $28,600 after five years. However, the standard deduction for a couple is $12,400 in 2014, so your standard deductions over five years would be at least $62,000. I think assuming that you’ll have a financial gain of $1,200 a year in tax deductions is a definitely a stretch.

    For a house/loan that cheap there are likely to be little to no tax savings when comparing to the standard deduction everyone gets.

    It’s also not really fair to call principal paid “financial gains.” That’s just money you saved, which you could have done without buying a house.

  • Tommy Unger

    To your first point Tim. We’re assuming that both people in this couple are working. With both working (and no children), it’s not a stretch to assume they are making enough to be above the standard deduction line. Imagine if they’re paying state income tax (most aren’t as lucky as us in Washington State), paying off student loans, giving a certain percentage of their income to charity, and they have some medical bills. Also, if you multiply your $28,600 times a marginal tax rate of 20%, you get close to $5,900. We got $6,000 because we used a slightly higher 30 year fixed rate than you did.

    And as far as your second point, the key is that we’re not comparing saving (or even more tricky, investing) with buying a house. We’re comparing money you spent on wedding/jewelry/honeymoon with money you saved by purchasing a house. In that comparison, I think our approach is strong.