Dream home vs starter home – Which one to opt for

February 9, 2022 . Fundamentals of home buying . 10 min read
Dream home vs starter home | HomeCapital Blog

Home buying is one of the important things on almost everyone’s bucket list. However, to buy a starter home or a dream home is something to be thought about. There are lots of factors to be considered prior to making a decision. Home buying decision depends on your financial planning as well as income. It also depends on which area you intend to buy your starter or dream home.

Let us have a walkthrough to understand the concepts of a dream home and starter home and their merits and demerits.

Starter home

A starter home is a more affordable option when you are low on finances. However, the home buying process remains the same.  You can consider it as a home where you can live for a few years to prepare yourself to buy your dream home.

This starter home comes with some amenities and possibly with some interior designing expenses. Usually, starter homes are smaller in size and located in suburbs compared to the dream home.

With this step, you will have a complete experience of home buying and a chance to prepare your finances thoroughly for your dream home. A starter home can be chosen once you have achieved some stability and have some savings.

Dream home

A dream home is a long-term house that you have dreamt of all the time. It may be in any desired area, any size, or style. It depends on the imagination of the individual. You may think of having a large apartment with a cozy balcony, plush interior, upscale furniture well equipped with electronic appliances.

Dream home can also be the one you are looking for in your favourite neighbourhood where you have spent your childhood. The best time to go for a dream home is when your career is stabilized or you have achieved financial stability or in case, you are planning for a family.

Merits and demerits of starter home

The advantages and disadvantages of a starter home are listed below:

Merits of starter home

1. Making a choice of a starter home and buying it will give you the much-required stability to prepare financially for your dream home in the near future.

2. From an investment point of view, buying a starter home can increase your finances with its appreciated value.

3. You can use the funds to buy a starter home which otherwise you are spending on rent.

4. These homes are affordable in comparison to a dream home with a lesser down payment and also your EMI.

5. You can seek tax benefits from these homes to avail of loans.

6. Starter homes are usually smaller in size, so you can save a lot of money on interior and furniture.

Demerits of starter home

1. Starter homes come in fewer amenities and may have repairs and high maintenance cost

2. They are smaller in size than the dream homes and may not be big enough to start a family.

3. You may take more time in selling your starter home than estimated.

Merits and demerits of dream home

The advantages and disadvantages of a dream home are listed below:

Merits of dream home

1. Dream Home is usually larger in size and can accommodate a larger family

2. With regard to location, possibly it is in your favourite neighbourhood where you had spent your
    childhood. And for your family as well, it is a great aspect of convenience.

3. You can customize and spent more money on interior design, décor, and furniture as per your
    imagination. It is like the way you had dreamed of.

Demerits of dream home

1. A dream home is large in size, its interior will be high on maintenance cost, electricity bills, and property taxes.

2. The buying cost of this home is higher than a starter home. Your monthly EMI will be much
     greater than a starter home and hence a slower return on investment.

Buying a home whether a starter or a dream requires doing proper market research and detailed financial planning. However, the home prices and their appreciation depend on the market dynamics. There are no set rules or standards that one can follow. But it is about understanding the price variation, real estate economics, and financial position of the buyer.

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