Back in the old days, it was common for adults to buy a ‘starter home’. This home was typically a small, modest property that could accomodate the early stages of a family. As their careers advanced and their families grew larger, they moved into bigger and better homes. Nowadays, many people struggle to come up with a down payment for the very first home they purchase. They might wonder if it’s wiser to wait and save more money so they can buy a property that makes sense long-term. It’s a personal decision that only you can make, but here are some pros and cons of buying a starter home.
Buying a home usually makes you feel grounded and part of a larger community. After making a few small renovations, many new homeowners enjoy nesting at home, having friends over, and enjoying their new space.
Con: Moving twice
If you’ll be ready to upgrade in a few years, that means you’ll have to move twice. It might be more cost-effective to save up for a larger house instead.
When you move into your first home, the odds are good that you can realize some equity. If you can commit to five to seven years, you’ll probably come out ahead. By making improvements that add value, you can take the equity you’ve built and apply it as a down payment on your next home.
Homeownership requires many hard and soft costs. Property taxes, mortgage payments, home furnishings, window coverings, and landscaping improvements are just a few examples. You also might want to paint, refinish the floors, or change the carpet before you move in. And don’t forget about the mistakes you’ll inevitably make along the way (by hiring the wrong contractor, for example). Instead of buying two different homes, it might be smarter rent and save for your long-term home.
Pro: Tax benefits
When your own a home, you can write off a portion of your monthly mortgage. When you pay rent, the money goes to your landlord, and thats it. The sooner you own, the faster you can start investing in your property and save some money.
Even though the act of buying a home generally initiates stability, the world moves at a faster pace than it did years ago. Back then, people got married earlier, stayed married forever, and kept the same job through retirement. Today, people stay single longer, divorce rates are higher, and many people purchase their starter home solo. This means homeownership might not be part of the equation. What happens if you buy a starter home and then you get a job transfer overseas? You might get stuck renting out your house or selling your home at a loss.
It’s your decision
Ultimately, the decision is yours. If you plan to hang out in your starter home for five to seven years, it’s a smart move to buy. However, if you can see any major life changes happening in the near future, you might want to keep renting. Homeownership is a personal choice, and there isn’t a single path that makes sense for everyone. Go with your gut, and make the decision that’s best for you.