How Buying My First Home Helped Me Afford A Bigger One
Climbing the property ladder is easier once you have set foot on the first rung.
Key points
- Home ownership can be expensive.
- This is especially true if you want to buy a large property.
- Buying a first home can make upgrading easier for you.
Several years ago, my husband and I built a relatively large home that is large enough to accommodate our growing family as well as extended visits from grandparents. Making this purchase was easy for us for one simple reason: we had purchased a home before and owning that first property opened the door to buying our dream home.
Here’s why buying our first cheap home ended up helping us get into the biggest property that ticked all of our boxes, one we hope to stay in for a long time, and one that still has an affordable monthly mortgage payment.
Entrepreneurship on the path to home ownership helped us buy our dream property
When we bought our first house, it was a smaller one that needed a bit of work. But we could easily afford it at the time and put a down payment on it, so it was the right fit.
We also hoped that the initial purchase of this imperfect property would one day help us buy a home that would suit us better. It worked out well because the house we bought went up in value and we were able to pay off a lot of our mortgage while living there.
Since the value of our house increased – as often happens over the years in most normal real estate markets – and our mortgage balance fell, we were able to sell the house for much more than what we had.
Since we made money selling the house and walked away with money even after paying off our lender, we were able to turn that initial purchase into a bigger house. We used the money we got from the sale to put down a big down payment on the better, more expensive house we were building.
Why this approach worked well for us – and tips for making it work for you
This approach has worked well for us for a few key reasons.
First and foremost, we made a reasonable down payment on the property we originally purchased and paid off our loan diligently. As a result, we maximized the chances of being able to sell the house for far more than we had to in order to help raise the down payment we needed for a bigger house.
Second, we made sure we didn’t overpay for the first home and chose a property that would hold its value well. We carefully researched homes, found one we could do a little DIY, and picked a home in a location we knew would always be in demand. It also increased the likelihood that we could sell the house at a nice profit.
Finally, we made sure to use all the extra money from the sale of the house to make a big down payment on the new house. We did this in order to reduce our borrowing costs and to have a wide choice of lenders offering a favorable rate, because our large down payment reduced their risk.
If you ever want to buy a large property, you might want to consider buying a smaller one if you can make it work for you by following the same steps we did. At worst, you’ll still end up with a home that will help you build wealth, even if it’s not the ideal property. At best, the first home you buy might make it easier for you to get to your dream home.
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