Real Estate and Mortgage

Should We Buy A Starter Home Or Forever Home?

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These days trying to find a starter home is not only difficult but it’s costly.

Not a day goes by that we are not thankful that we paid our mortgage in full after five years.

Today, young couples are priced out of the market and opting to rent or move back home to save money if the option is available.

House hunting with my sister-in-law and her realtor allowed us to step back from the process.

By doing so, we were able to experience what a first-time homebuyer is facing today.

Before even considering purchasing a starter home, you must pass a mortgage stress test.

As of 2018, all Canadian home buyers are required to undergo a mortgage stress test – even if you make a down payment of 20% or more on a house., footnote 11 On June 1st 2021, the Office of the Superintendent of Financial Institutions (OSFIO S F I) and the Department of Finance introduced new rules to the mortgage stress test that will impact home buyers as of June 2021 and beyond.

Mortgage Stress Test Rules- Bank Of Montreal

The reason for the mortgage stress test is to ensure that if mortgage rates increase that you can still afford to pay your mortgage.

This is one of the most brilliant ideas because it’s so easy to get a mortgage loan and go overboard.

If you’re already a homeowner with a mortgage, you will go through the same process if you apply for a line of credit, bank loan, refinance or find a new lender.

Let’s have a look at starter homes, forever homes, first-time buyers, seniors, retirement, divorce and a house full of happiness.

We start with a CBB reader question. Let’s go.

Should We Buy A Starter Home Or Forever Home?
Should We Buy A Starter Home Or Forever Home?

Making Tough Decisions Buying A Starter Home

Dear Mr.CBB,

My wife and I are in our early 30’s and looking to move outside of Toronto into the surrounding area.

Housing is so expensive that we are struggling to keep up with the bills and maintenance.

Ideally, we’d like a home close to a school, a nice neighbourhood, older homes but not too old.

Our top price is $800,000, and we wondered what your thoughts were about buying a starter home versus a forever home?

Should we splurge and buy a bigger home or stick with a smaller family home as we plan to have kids.


Scott and Sherry

Deciding to buy a starter home that is meant to be short-term or a forever home which is for life comes with many challenges to consider.
Buying a Starter Home Townhouse

What Is A Starter Home?

A starter home used to be one that a first-time homebuyer would purchase and live in for five to ten years.

Do starter homes still exist? The answer is yes; however, many people buy a starter home and stay in it forever.

Spending money to upgrade a starter home allows the homeowner to prepare to sell when ready.

The idea is to renovate without spending a fortune and keeping the house neutral for buyers to visualize.

Please don’t go crazy with colours, expensive upgrades such as kitchens and hardwood floors etc., unless it adds value to your home.

Talk to your realtor and see if they have any tips for you about renovating your starter home today to sell in the future.

The reason is that your home will be appealing to another starter home buyer.

Whether you are a parent, single or a couple, eventually, the starter home might feel cramped.

After renovating the house, increased income, and children come into the picture, things change.

Perhaps selling to buy a forever home at this point is ideal, especially if you want to be close to a school.

If you live in the country, moving into the city may allow a family to save travel time.

That was the way it used to be, from my understanding, but not anymore.

What Is A Forever Home?

Ah, the forever home is the last home you will ever live if you don’t pass away or fall ill after moving to a long-term care facility.

It is a shame when a couple spends their entire life saving for their retirement dreams, and one passes away early.

Recently, this happened to someone I know, and it hit me hard. I’m not afraid to say I cried.

They were as frugal as they come, and every dollar mattered, as did planning getaways together.

The future was vital because most people want to ensure they have enough money to retire.

Sadly, she will never experience the fruits of her budgeting, saving money and being frugal whenever she could.

Her husband, however, will, but nothing replaces someone that you love.

After discussing our retirement, we considered whether we are saving enough while living our life to the max today.

Not Living Up To Everyone’s Expectations

A few days ago, I had to explain to a reader why her frugal is not our frugal and that life changes.

I’ve always said to NEVER compare yourself to someone else and never put expectations on someone you don’t know.

Today, you might not want a forever home, but you might change your mind based on circumstances in the future.

A starter home today may turn into a rental house for us in the future, but for now, we’re staying put.

It doesn’t mean we aren’t frugal anymore; it just means that we live our lives based on our income.

The same goes with a budget and being frugal with specific budget categories based on needs.

You will never know the back story about every expense, but trust that they are doing okay.

Are we going to be judged by our readers because we buy a bigger house?

Putting our life on the web has been helpful for so many people, especially that we are debt-free.

Who wants to learn from someone who has debt and struggling to pay it off?

That won’t solve any money issues you may have nor help you to reach your goals.

Leaving Because Blog Is Money Oriented

Isn’t that what Canadian Budget Binder is all about?

Money, Frugal Living and everything in between that fits in a budget is our Canadian Budget Binder.

Here is a comment I received the other day on the blog that took me by surprise.

Many years ago you said that you will never buy a smart phone for your wife because she does not need it. also you were not used the idea in spend money in makeup ( in excess).

Your wife spend hundred of dollars in beauty and your son has a tablet and you mention your wife has a 1000 dollars phone.

I guess is because your blog make you affluent you can spend in frugalities. Time has show me that you change in the way you spend money even if you save.

I admire the way you pay your mortgage in 5 years the way you save alot in the past all your passion when you wrote about it, lately I find you blog more money oriented and not the same that use to be. Thanks for your hard work and passion in the past years. I will stop being a reader of Canadian budget binder.

18 Things We Do As Extreme Savers Comment

Our Reply About The Blog Not Being About Frugality

Hi ****,

First off, I’m sad to see you go.

I also think that you misunderstand that frugal is different for everyone. I also feel you are judging us without really knowing what our family is going through.

Yes, we are debt-free, and we sacrificed lots over the years, and at times, we enjoy spending some of our money, especially now that we have a child.

The blog has nothing to do with this, and I spend countless hours researching and talking to other professionals to share what I feel are informative blog posts with all my readers.

I’m always learning. It was me who didn’t have a phone in Canada, not my wife and the only reason I got one was because my employer thought it would be helpful to reach other colleagues in the facility.

I took Mrs. CBB’s old phone, and she paid cash for a new one. She needed a good phone to monitor her dying mother on camera hours away, and we used it for business purposes.

We also got rid of our home phone and have no cable. Cell phones are not cheap, and we don’t have a plan or data with Mrs. CBB’s phone.

My phone does as it came with a $21 plan with data which was an excellent deal.

We also got rid of our second vehicle to save money.

You will see health and beauty products increase because my wife has a severe allergy which means she can only purchase certain products for her skin, hair and laundry.

Mrs. CBB hardly, if EVER, buys makeup, so I’m not sure where you are getting that information from.

In fact, she only wears a bit of coverup as her skin is sensitive.

She also lives with a life-long disease that requires certain products that she has to pay for from time to time. These are just new from over the past few years, so we separated our budget categories.

Every budget will always be different, and we can’t compare, which is what I’ve always said. It’s based on so many factors.

I’m not sure if you expected us to live off the same budget forever, as that will not be the case because life happens, health issues have been our biggest expenses.

We are renovating our house slowly, which is expensive, and our son has Autism which has cost us quite a bit of money over the past three years.

So, our life behind the scenes is more than just being frugal which you don’t know about.

I’m sad to see you go over us buying a phone for our business and personal family life that I haven’t felt the need to discuss in full as it’s personal and sensitive.

I”m sad that you don’t think we are frugal when we are.

Take care.


How House Hunting Can Get You Into Financial Trouble

As mentioned above, mortgage brokers and bankers may offer you a mortgage loan for more than you need.

Lots of people take that number and run with it to find the starter house of their dreams.

I’m sure you’ve heard, ‘my bank said they would loan me up to $400,000‘, so I’m going to spend that much on a home.

Perhaps you were that person that used every dollar the bank would lend you and wish you didn’t?

Maybe it worked out for you.

Again, this is where everything that has to do with money is personal and situational.

I always recommend budgeting as if you have a mortgage payment before you look for a home.

If you can’t afford it, the budget will show you the numbers and make wise choices.

Starter Homes Are The New Permanent Home

Looking to buy a house for anyone is stressful, especially when you are competing with other buyers.

What we learned from the process is that seniors owned many older homes.

They’ve lived in the house for years, raising their children, and they’ve since moved on.

There was no starter home because owning a home was the forever home.

In the 80’s Mrs. CBB’s best friend’s family (mom, brother and daughter) lived with their grandparents.

The home was where the grandparents raised their children and housed their grandchildren.

Since the grandparents have passed away, the grandson currently owns the home.

He’s raised his son as a single parent in the home while getting his engineering degree.

The house had become his starter home and likely his forever home.

Starting A New Career and Life

Here’s the catch, Mrs. CBB’s friend, who decided to go back to school in her 40’s lives in the home now.

We found it amazing how many generations can live in what was once a starter home.

The forever home was the starter home, and that same mindset is happening today.

Being House Poor Or Being House Happy

Being House Poor or House Happy

Years ago, I wrote a piece about a young man who taught us about being house poor.

I’ll never forget that conversation because we were both thankful that we didn’t go overboard.

I have a distinct feeling that being house poor will be the norm in this seller’s market.

Owing debt to a mortgage into retirement years is slowly becoming the expectation.

A friend in his 40’s purchased a home with 20% down at his max allowable amount from the bank.

Unless he pays extra mortgage payments or a yearly lump sum (if applicable to his mortgage contract), he may skim past or pay it off before he retires.

Houses that were intended as starter homes end up being permanent homes until retirement.

The reason has nothing to do with income but more to do with their health and debt-to-income ratio.

Reasons For Selling A Starter Home

Selling a Starter Home To Move Into A Highrise Condo

Perhaps a divorce happens, where one spouse can pay the other out and continue living in the starter home.

However, the single homeowner has to pay all household expenses, which may decide whether to stay or sell.

There are obvious reasons why people sell a starter home, and it’s not necessarily to buy up.

To buy up means to purchase a bigger home and ticks more boxes or is more expensive.

Also, who wants to move in their senior years unless it’s a necessity for health reasons.

For example, my parents are retired, and both have bad knees and had surgeries on them.

They are mortgage-free; however, their home is not a bungalow which has become a struggle for them.

Walking upstairs is going to get worse as they age, so they’ve sold their home to accommodate their health needs.

My mum and dad said they’d otherwise continue living in the family home to avoid the stress of home buying and selling.

Staying In A Starter Home

The apparent reason would be money and whether a bigger home is affordable.

Our neighbourhood is what one would have considered starter homes in 1995 when built.

Today, they are forever homes, but homebuyers have to dig deep into their pockets.

Starter homes in our city are the older townhouses and condos.

A home not much bigger than ours but has an inground pool sold last week for 1.1 million dollars.

That’s only one street over from us.

Originally the home was listed for 1.3 million dollars, and as you can imagine, our jaws dropped.

Both Mrs. CBB and I have been talking lately and decided to stay put at this point in our lives.

Although we’d like to own a country home, now is not the time for us to sell and buy.

A Starter Home Community

A Starter Home Community

We live in what was once considered a starter-home in 2009 when we paid $265,000.

Today, if we put our home on the market, we could list at a minimum of $830,000 based on comparables.

The housing market has gone bonkers in 2021, but in 2009 we bought during the housing crash.

We’ve recently seen numerous houses for sale in our area owned by seniors who bought in1995.

Here’s a fun fact: When we moved into our “starter home” in 2009, we were the youngest couple on the street.

That’s no longer the case because couples in their 30’s with kids have been slowly moving in.

What was once an affordable neighbourhood has become a luxury to first-time buyers.

Even new townhouses, semi-detached and condos are selling for more than detached older homes.

Other reasons to stay in a starter home may be:

  • Home was passed down to the owners with little to no mortgage and they had no desire to get one.
  • To preserve the home so it stays in the family as they hold many memories.
  • House affordability is out of range
  • No need to move if you’re happy where you live.
  • The home is paid off and the idea of another mortgage is not appealing

Senior Homeowners Moving On

A neighbour up the road who is retired and living alone as her husband passed away a few years ago bought their house for $131,000.

It makes sense for seniors to sell, especially if their home is too much to handle, which is her case.

Her health problems have led her to hire a house cleaner, snow removal company and lawn care.

Plus, she has so much stuff that she needs to downsize, so she doesn’t leave it for her children.

She still drives, but living alone is taking its toll on her as she has no family living in our city.

The only problem is everyone who sells a house needs somewhere to go.

As a senior, you’ll either spend more to buy a bungalow, move to a town where housing is cheaper or move in with family.

Another contemplation is the state of the homes looked at in their price range and whether it needs renovations.

Some seniors buy a condo or even rent an apartment because there is less responsibility.

The lady who owned our current home sold it because she couldn’t take care of it any longer.

She was on her own as her husband had passed away and decided to rent an apartment.

There’s so much to consider.

Moving Into A Retirement Home Setting

Another couple we knew that lived on our street both moved into a retirement home and sold their starter home.

There were only two of them as their children were grown and moved out of the family home.

Now everything is taken care of, and they pay a monthly expense to the retirement home. Easy enough, and they get to live in an apartment-like setting.

No one says you have to leave retirement money for the family; use it if you need it to survive.

Other Reasons To Stay In A Starter Home

You might want to stay put in your starter home for other reasons such as those below.

  • Home was passed down to the owners with little to no mortgage and they had no desire to get one.
  • To preserve the home so it stays in the family as they hold many memories.
  • House affordability is out of range
  • No need to move if you’re happy where you live.
  • The home is paid off and the idea of another mortgage is not appealing
Deciding to buy a starter home or a forever home is tough, as is selling a starter home to buy a forever home, as we've found out. 
With job concerns, health concerns, and family planning, so much can happen that can affect your income, so it's important to understand debt and your mortgage today and tomorrow.
Deciding to buy a starter home meant to be short-term or a forever home, which is for life, comes with many challenges to consider.

Staying Put Forever Might Be A Smart Move

We have 20 years until I retire, and we’re debt-free at this point in our lives.

Sounds great but having a child with a disability and a sick wife means staying put is the smart move.

Who knows maybe, we’ll stay in our starter home forever and pass it on to our son.

No one knows what the future will bring, and that’s why when we play with money, it’s all about risk.

Discussion: Are you living in a starter home or a forever home? Is your forever home considered a starter home? Why did you choose to move into a forever home? Why did you not decide to move into a forever home?

I would love to read your feedback on a crucial topic, no matter if you are a first-time buyer or have moved several times.

Please share your experience and tips with all of us.

Take care,


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