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When a starter home becomes a forever home

By Liz Keuler

November 2018
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As a first-time homebuyer, should you buy a starter home or a home that might accommodate your changing family and changing needs for years to come?

The distinction might not be as sharp as you think. A starter home is really in the eye of the beholder; a modestly-priced home you can afford means something very different depending on your location, your finances and your future plans. And sometimes, even you may not realize that your so-called starter home is really your forever home.

Meet Andy and Linda

For the first 4 years of their marriage, Andy and Linda lived in a one-bedroom apartment in Little Falls, New Jersey. One bedroom was all they needed, and they loved to go out, heading to the city for dinner or drinks or a show.

But in 1977, at 26 years old, they started thinking about buying a house. "We knew we wanted a family someday," said Andy, "And we both had fond memories of growing up in a family home ourselves."

Looking for the starter home of their dreams

Andy and Linda started saving for a down payment, cutting back on eating out, entertainment and other expenses. After 6 months, they thought they had enough saved to start looking at houses.

They scoured the area for a condo or single-family starter home. They found what they were looking for in Wayne – on Linda's route to work.

The house had a big backyard, a great kitchen, and 4 bedrooms. It was in a great neighborhood with good schools. Andy and Linda were hooked.

There was just one problem.

"We were shocked to realize that what we had saved was probably not enough for a down payment," Linda said. "We wanted to be independent, so we didn't ask our parents for help or advice." But their real estate agent and lender helped them understand their options – including a conventional loan with private mortgage insurance.

Andy and Linda scraped up enough money for a 10% down payment. Their loan was approved with a 9% interest rate and a private mortgage insurance premium of $10 per month.

When a starter home becomes a forever home

"When we bought the house, we thought we were buying a starter home," Andy said, "We expected to move in 5 years or so." But over the years, the house was there for them in ways they couldn't initially predict.

Eventually, Andy got a new job in New York City; the house was in a great location for commuting. The big backyard became a perfect practice space for their son, who was competitive in soccer and volleyball. And when Linda put out her shingle as a dietitian, they built an addition that became the perfect office.

Their home was comfortable and affordable – even more affordable after they had built enough equity to cancel the mortgage insurance premium. They refinanced a few times to take advantage of lower interest rates. And they realized that instead of a "starter home," it was just plain home.

Saying goodbye to the almost-forever home

Over 40 years later, Andy and Linda are on the verge of retirement. They love their "starter home" just as much as they ever did – but it's time for a new adventure. They plan to sell the house next year and move to a house they are building in Delaware.

"This house has so many memories," Linda said. "It was difficult to make the decision to sell because the house meant so much to us over the years."

Their house has one last gift to give Andy and Linda before welcoming a new family. With appreciation and the value they added through improvements, Andy and Linda estimate that their house is worth about 8 times what they paid for it in 1977. They didn't start looking for a home in 1977 as a financial investment so much as a lifestyle investment – but it ended up being a great choice in both areas.

Whether your "starter home" ends up being home for 3 years, 40 years or even longer, your choice can be a great springboard toward your future as a happy homeowner and a smart investor.

Berta

Muy buenos

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Liz Keuler is the editor of Readynest. She spent a decade meandering through radio, nonprofits and the corporate world before convincing MGIC to hire her based on her staunch grammatical convictions. She lives in a charming 100-year-old bungalow on Milwaukee’s East Side. Her interests include old Ernst Lubitsch films, new action movies, 60s girl pop, Regency romance novels, word games, sewing and shallots.