Prakash Bhat, a real estate and mortgage consultant based in Abu Dhabi, explains that a “starter home,” also known as an entry-level home, is usually the first property that a new homebuyer purchases and is typically priced lower than other homes available in the market.
Investing in a “starter home” can help you ease into homeownership and provide an opportunity to build equity while maintaining financial flexibility in case your plans change. However, if you are prepared to settle down and can come up with a down payment promptly, then considering “forever homes” may be a suitable option.
The notion of a “starter home” emerged as a popular choice for young families who wanted to own a property before they could afford their dream “forever home,” which was usually more expensive. These homes can also aid in building home equity. Let’s explore how this process works.
GLOSSARY: ‘FOREVER HOMES’, ‘HOME EQUITY’
‘Forever homes’: These are the homes that one intends to live in permanently, as they are well-suited to meet their current and future needs, and may be more expensive than starter homes.
Home equity is the value of a homeowner’s financial stake in a home. It can increase over time if the property value increases or as you pay down the mortgage loan balance.
So building equity increases the amount of money you have in your home that you may be able to use now or in the future. You can borrow from your equity as a loan, invest it, build long-term wealth or sell your home for more than you owe and keep the difference.