When buying a new home, you should not always expect that you’ll stay there forever. This is especially true for first time buyers, who often need to buy a starter home first before they can build up enough equity to buy a forever home. But sometimes it’s the right call. Keep in mind that you don’t actually have to live in your forever home forever; it just means that you could see yourself doing so. And a starter home doesn’t have to be your first home; it can be a middle stage on the way to your forever home. Neither is a binding commitment.
So when should you buy your forever home, and when should you buy a starter home? Starter homes are generally less expensive, and are something you plan to sell later. If you immediately purchase a new home after selling, you may be able to avoid capital gains tax. It’s an investment for the future. The downside is that they’re generally smaller. If you are planning to have kids soon, a smaller home may not be big enough, and moving frequently can be hard on kids. But that isn’t the only factor in determining if you should buy a forever home. Even if you could see yourself living there forever, that doesn’t mean it’s financially sound. More expensive homes will also have higher mortgage payments, taxes, and insurance fees. You may want to consider it, though, if you are able to secure a low interest rate.