Forever home vs. starter home – for many couples, this is a contentious subject. While you may feel like a starter home makes the most sense, your partner may have opposite feelings.
In the past there was no question – most young people would settle on smaller, more affordable homes until other properties were within reach. But in recent years, things have changed. There are more and more people who decide to bypass the starter home and splurge on a house that will serve them for the long haul.
What is best for you? We pulled together our collective wisdom on this topic to help you identify the best approach for you.
Starter homes don’t always possess all of the shine and glitter that you find in more expensive dream homes. A starter home may simply be a small home or condo that you can afford now –— with or without making some improvements.
Buying a starter home is like homeowner “training.” It’s the first opportunity you have to really be able to knock down walls and make something yours. It gives you all those real-life experience that come with owning a home – like getting home insurance and dealing with maintenance issues.
Over time, your priorities will shift. While you thought having a pool in your backyard would be awesome, you may soon realize that this would dramatically increase your homeowner’s insurance and may not be so great after all. Or your life will change in unexpected directions and other types of spaces or locations will become more important.
The advantage of a starter home is that when you are finally at a place in your life where you’re ready to settle down for the long haul, you’ll know exactly what you want and will be able to afford your dream home.
One of the biggest cons of buying a starter home comes in financing. While it’s cheaper up front to purchase a starter home, chances are it will need some improvements. The money you spend on these improvements may or may not be redeemed in the future when you sell your home.
Another approach is jumping right in and buying your forever home. A forever home is a space you can see yourself living in for 20 years or more. It’s got the beautiful kitchen with the marble counter tops. It has several bedrooms and lots of room for growth.
Most newly married couples can’t afford their forever home immediately. So you may choose to rent something more reasonably priced while you save up for a larger down payment on your dream home. The bigger the down payment, the smaller the loan.
A big benefit of buying a forever home is that you likely don’t have to think about buying another home very soon. With all the work that goes into moving, this can be a big appeal for some.
What’s best for you?
If you’re struggling with deciding between a starter home and a forever home, we recommend doing your due diligence up front. Sit down with your significant other and put together a list of the things you envision for your home. What’s important to you? What’s not as important? How do your views differ from those of your partner?
In many cases, just talking through the scenarios will help you determine the best path for now. Another way to determine whether you should spend big upfront or save is by calculating the rough difference in cost between your starter home and forever home.
You can get a grasp of the demand for housing in your area by checking out the projected population growth. Schools, economy, businesses, location, property size and home size all affect the demand for houses. Also, location can be a huge factor in a home’s price – because even just the perception of the place can increase or deteriorate the property value.
If the difference can be saved in one to two years, then it may be a good idea to wait and save for your forever home. If the difference takes longer, consider an option in between the two. In addition to the difference in mortgage payments, it’s important to factor in tax payments as well. In addition, if you do not have 20 percent to put down on the house, you will also need to figure in private mortgage insurance (PMI).
What it ultimately comes down to is money. If you can’t afford the big house in the great neighborhood right now, perhaps you should consider looking at a townhouse instead of a single-family home. Or consider making other sacrifices like going for a nice home with a small yard, or buying a bigger home, but being willing to make improvements on your own if you have the necessary skills. You may have to settle for something that suits your current needs before making the commitment to invest in a forever home.
We know this isn’t an easy decision. If you would like some extra guidance or want to talk about loan options, give us a call – we’re here to help!