Buying a Starter Home Really Paid Off for Me. Here's Why

Getting a mortgage loan and buying a starter home was a big financial decision my husband and I made years ago.

When we bought our first house, we knew we did not plan to stay there for a long time and that it would not be our permanent home. As a result, we went back and forth on whether we should buy it or rent for a little longer until we had more money to buy something we'd want to stay put in "forever" or for at least for a longer period of time.

Ultimately, though, I'm glad we made the decision to move forward with the purchase because buying a starter home really ended up benefiting us financially in the end.

Buying a starter home set us up for the future

Buying a starter home benefitted us for one primary reason. We were able to live in the house, benefit from the equity we acquired as we paid down our mortgage, and take advantage of property appreciation.

We stayed in our starter home for several years and paid down a good portion of our home loan during that period of time. We also saw our property values increase pretty substantially over the years that we lived in the house.

As a result of our rising property values and the fact we paid off part of what we owe, we were able to sell the starter home for quite a bit more than we owed on our loan. This meant we could pay off our mortgage and be left with a reasonable amount of money to make a down payment on a bigger, better home.

The starter home thus directly led to our ability to buy a dream property that would be more likely to be our forever home (although, we ultimately ended up selling that one at a profit too, in order to trade up).

Should you buy a starter home?

We may have gotten lucky in our experience with property values rising before we were ready to sell. But, the reality is, in most cases, if you stay in a home for several years and you pay your mortgage steadily during that time, you are likely to be able to sell the house for quite a bit more than you owe.

This is true even if property values don't go up significantly, as in most areas you are likely to see your home's worth rise at least a reasonable amount over time (although, of course, there's no guarantee). Even a small increase, combined with years of payments, means you'll probably have enough equity in your home to make it a lot easier to make a larger down payment the next time around.

In this way, getting on the property ladder with a starter home can help set you up for buying a dream property in the end. And, even if it doesn't, if you decide to stay put in your so-called "starter" home, at least you'll be working on building equity that will help you grow your net worth.

You want to be sure you can easily afford your starter home, though -- including any maintenance costs. And, of course, you shouldn't buy if you plan to sell right away as property values may not rise enough to pay off transaction fees associated with a quick sale.