When you purchase your first home, it may be tempting to go for a more affordable house, but will it save you money in the long term?
Though your monthly mortgage will be lower, you could wind up spending those savings on renovations. Here are a few pros and cons of purchasing a starter home versus a forever home.
Pros of Purchasing a Starter Home
1. Affordable
According to the United States Census Bureau, in 2020, 67.9% of Americans owned a home. The smaller the house, the less you will pay for it in most cases.
Purchasing a residence with less square footage could save you money on your monthly mortgage and utility bills. In addition, a tiny house will cost you less to heat, cool, and light.
As a young person, you likely do not need a ton of space and could keep your living expenses low by purchasing a classic starter home.
Remember that you also have to insure your home in addition to the other bills you accumulate. Homeowner's insurance covers only theft, damage to the structure, and injuries that may occur on the property.
Home warranties cover the breakdown of items such as appliances, heating, cooling, plumbing, and electrical and are renewable annually. Take the time to do your due diligence when choosing the best home warranty company to find the right coverage for your home’s needs.
2. Less Maintenance
Modest homes require less maintenance than larger ones. Less to clean, less lawn to mow, and fewer things to fix mean you can spend your time and money on other things you likely enjoy more.
Additionally, a smaller house means a smaller furnace and air conditioning unit, which will be more affordable to replace or repair than larger ones.
3. Potential Future Rental Income
When you purchase a starter home that leaves you plenty of extra cash in your pocket after paying your expenses, you may be able to afford to buy a larger home while keeping the first one to rent out.
This means you could have rental income to supplement your salary and help you live a comfortable life without constantly worrying about your finances.
Cons of Purchasing a Starter Home
1. Small
Though starter homes seem ideal when first purchased, owners often quickly run out of space. This is especially true for people thinking of growing their families.
Babies are tiny but require a lot of stuff, and your once tidy living space can fill up with swings and rockers faster than you realize.
2. More Difficult to Resell
Houses with fewer bedrooms and bathrooms can be more difficult to sell when you have outgrown the home yourself.
A spacious kitchen also goes a long way to entice potential buyers. Without these features, it could take you longer to resell your starter home, and you might not get the offer you hoped for.
3. May Require Renovations
First homes at a low cost could mean that renovations are needed to bring the dwelling up to your standards. This will take a considerable amount of time and money.
If you are looking for a new home that you can move into without worrying about construction, purchasing a starter house might not suit you.
Purchasing a starter home instead of your forever house could be wise, depending on your unique circumstances.
Run the numbers of all potential expenses and think through your long-term plans before deciding. Are you looking to sell as you buy? Let Contenza Properties be your partner in the process. Find out how they can help.