Should you make your “starter” home your forever-home?

With the average single-detached home price in many cities continuing to climb1, it’s natural to become a little discouraged about your home ownership prospects. And it’s even more natural to consider the idea of a ‘starter’ home.

Simply put, a starter home is a first home that is affordable and meets your family’s needs today. A starter home is typically purchased with the intention of selling in the short term (often within five years) in favor of a larger home, often to accommodate a growing family.

But despite soaring house prices, the home ownership dream is alive and well amongst the 20 and 30-something crowd. As a result, townhouses and condominiums have become a viable option for many young families. An alternative many families may not have even been considered a few years ago.

No matter what type of home you buy, however, there are a few reasons it could be wise to completely forego the idea of the starter home and purchase instead for the long haul – tiny home or not.

1. The hidden costs of a home purchase

When you purchase a home, there’s more to the story than just the selling price. A few other things you need to consider each time you purchase a home include:

  • Possible “land transfer” taxes
  • Lawyer fees
  • Moving costs
  • New furniture to suit the new space
  • Time off work for moving

These costs can easily add up to thousands of dollars and need to be considered each time you purchase a home. Though you may see a gain in market value on your sale, these hidden costs (both monetary and non-monetary) can quickly erode those gains – deeming them minimal or non-existent if you sell within a few years.

2. The ability to shrink your mortgage by staying put

 You should think of your mortgage as a fungus, not a houseplant – the goal is to get rid of it, not grow it!

By purchasing a larger home, you may be trading up in terms of square footage but you’re probably also trading up in terms of debt load. But by keeping modest monthly payments, you can allot more of your budget to fun things like travel and family activities. It should also be noted that during the early years of home ownership, life could get increasingly costly in a number of ways:

  • Additional children and associated daycare costs
  • Required or elected home renovations
  • New vehicles for a growing family

Keeping your modest home allows more room in your budget for both expected and unexpected expenses and gives you the freedom to spend on areas that add value and enjoyment to your life.

3. A bigger house means bigger expenses

 It’s certainly nice to have additional room to grow your family, but a bigger house comes with the onset of sizable expenditures. This includes more furniture to fill your larger space, higher heating and cooling bills. You might also need cleaning services to keep your home tidy and dust-free.

Remember to take these extra costs into consideration to get a full picture of what your new household budget will look like.

Big fish in a small pond

If you’re trying to decide if you should stay in your starter home, here are a few questions you need to ask yourself:

  • Do you expect to grow your family? If so, your home should have enough room to accommodate the number of children you plan to have.
  • Do you want a pet? If you’re set on owning a furry friend, this is something you’ll want to consider when choosing a new home.
  • Are there quality schools in the area? Sometimes, highly-dense city areas can actually lack education options. This is certainly something to consider before making a location decision.

Bigger doesn’t always mean better. Above all else, you need to consider your priorities and decide what works best for you. If you’re totally comfortable living in a small space and can envision your whole family living in one, then the ‘starter-forever-home’ might be for you.

If that’s the case, a major benefit is that instead of having to focus your funds towards a larger future home, you’ll be able to shrink your mortgage and keep your expenses low. If you still need convincing, just ask Warren Buffet – he still lives in the same home he bought nearly 60 years ago.2

  1. “GTA real estate market conditions presage further rise in home prices” – The Globe and Mail, 2017
  2. “This Is How Much It Costs to Live Next Door to Warren Buffett” – Time, 2015.

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Pira Kumarasamy

Pira Kumarasamy, is a Toronto-based freelance writer and communications consultant in the financial space. She has a background in economics and enjoys making complex financial topics relatable to the average Canadian. Her areas of interest include financial markets, student loans and real estate. You can reach her on Twitter (@PiraKumarasamy) or LinkedIn.