More women are deciding the place for their money is in a home.
About one in five home buyers were unmarried women last year, about double the rate of buying among single women 15 years ago, according to the National Association of Realtors.
A demographic trend toward later marriage is a key reason many more young, single women are buying, adding significantly to the numbers of unmarried female home buyers, observes Allegra Calder, research analyst at the Joint Center for Housing Studies at Harvard University.
The widespread perception — backed up by the performance of real estate prices in recent years — that owning a home is a sound investment also propels the buying movement among single women, says Calder.
“There are now many women who are single in their late 20s who have decided that it would be silly to rent,” she notes.
“Women are putting themselves in a better position financially [by owning],” adds Janet Boguslaw, senior research associate at the Institute on Assets and Social Policy at Brandeis University, Waltham, Mass.
“Women tend to have lower incomes than men and can’t put as much money away. But if they own a home, they have an asset that accumulates in value,” Boguslaw says.
The gender of the owner doesn’t alter the financial benefits of being a homeowner, like the tax deductibility of mortgage interest. But experts acknowledge that women’s lives and perceptions are often different from men’s.
They advise women to consider the financial aspects of ownership. Among them:
– Count all the costs.
The expense of owning includes more than what you pay in a mortgage, points out Calder. Emergencies, such as a furnace that demands immediate replacement, can add significantly to the expense.
A recent survey of single women homeowners living alone commissioned by Sears, Roebuck and Co. found that 71 percent of the 302 respondents said that home maintenance is a major concern, and about 60 percent of married or male homeowners rated maintenance as a major concern.
Moreover, one-third of single women owners reported that they always or often use outside professionals to handle maintenance, while only 17 percent of single male owners reported using outsiders in a similar survey last year.
Before they buy, women should assess how much maintenance expense they can expect, says Calder. It’s also prudent to build an emergency fund.
– Beware of equity erosion.
Home equity is determined by taking the current value of your home and subtracting the total amount of mortgage debt.
After buying, owner’s equity should gradually rise as the home increases in value and the buyer pays down the mortgage.
But it’s also easy to borrow against equity, as lenders aggressively market equity lines of credit and equity loans.
One-quarter of the women in the Sears survey borrowed against their equity in the last five years. One-third of those borrowers used their equity money to pay off credit cards, but then about 40 percent of those reaccumulated credit-card debt.
Paying off credit cards with equity can be a smart move, say financial planners, because the interest on equity debt is tax-deductible. But owners are draining their wealth senselessly if they rack up bills again.
“I don’t think [survey results] show that women make this mistake more than men,” observes Diane Maloney, a financial planner in suburban Plainfield. Rather, all homeowners with a propensity to use too much credit have to be careful paying bills with equity, she notes.
– Match your loan to your moving plans.
Low and no down payment mortgages have made it possible, especially for young women, to buy right away. But if they move within a couple of years, the price they sell for may barely cover the mortgage they’ll have to pay off, and they may take a loss after commissions, notes Maloney.
Many buyers may also be taking adjustable rate mortgages, where the interest rate could jump later, and they will then struggle to afford payments, says Maloney. However, those taking adjustables who are reasonably certain they will move before rates jump avoid this risk, she notes.
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