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Toronto is a place where many people dream of becoming homeowners. The city is known for its exciting mix of cultures, strong job market, and the chance to build a life in one of Canada’s largest urban centres. However, when it comes to buying a home in Toronto, new buyers often wonder whether they really need a “starter home,” or if they can jump straight into purchasing a home that meets most, if not all, of their needs for the long term.

A starter home is usually a smaller, more affordable property that first-time buyers purchase as a step toward something bigger and better later on. But with Toronto’s housing market prices rising year after year, it can feel risky to buy something that you may quickly outgrow. Some wonder if waiting longer, saving more, and going directly for a “forever home” might be the smarter choice. 

If you are debating what to do, working with experienced professionals can make a huge difference. The Johnson Team, known for their strong reputation, local market knowledge, and creative marketing strategies, can help guide you through one of the biggest decisions you will ever make.

What Is a Starter Home?

A starter home is commonly thought of as your first home purchase. It is often smaller, simpler, and less expensive than the home you might aim to have one day. For example, a one-bedroom condo or a modest townhouse can be a starter home for many first-time buyers in Toronto. The idea is to get into the housing market with something affordable, build some equity, and then trade up to a larger home after a few years.

Why Were Starter Homes Popular?

Starter homes have been popular for a long time, especially in large cities like Toronto. They offered a way for buyers to enter the market without having to save a huge amount of money for a down payment. In the past, you could buy a smaller condo or a fixer-upper home, stay in it for a few years, and then sell it to buy something bigger. This strategy often worked well when prices were steady or rising at a slow pace. It allowed people to feel like they were making progress toward their dream home.

Toronto’s Real Estate Market Today

Toronto’s real estate market has changed a lot over the years. It has been on an upward climb, with prices for both condos and houses trending higher. One of the reasons is the strong demand and limited supply. More people want to live in Toronto, which puts pressure on housing availability.

Rising Prices

The average price of homes in the Greater Toronto Area has risen sharply. Even condos, once considered a more affordable option, have become pricier. This means that a so-called “starter” home may already be quite expensive. Many buyers worry that if they settle for a smaller home first, they may not be able to upgrade later without spending a lot more money, time, and energy.

Toronto’s Condos vs. Houses

In Toronto, condos are often the go-to for starter homes. They generally cost less than a detached or semi-detached house. However, not everyone is happy living in a small condo unit, especially if they plan to start a family soon. On the other hand, single-family homes in nice neighbourhoods can be very expensive and out of reach for many first-time buyers. This leaves a lot of people wondering whether it might be better just to wait and save up enough money for a home they can stay in for a longer time.

The Pros of Buying a Starter Home

If you are thinking about buying a starter home, consider what it can offer.

1. Getting Into the Market

Owning a starter home is a way to stop renting and start building equity. When you pay rent, the money is gone forever, but with a mortgage, you are slowly owning more of your property. If home prices continue to rise, you could also gain from the increase in your property’s value over time.

2. Building Equity

Equity is the value of your home minus the amount you still owe on your mortgage. As you make your monthly mortgage payments, and if your home’s value goes up, your equity grows. Later, you can use that equity as a down payment on a larger home. This can be helpful if your life situation changes, like if you have children or need space to care for elderly parents.

The Cons of Buying a Starter Home

While starter homes can be a good way to enter the market, there are some downsides you should be aware of before making a decision.

1. Outgrowing the Space

You might outgrow a starter home faster than you think. Maybe you buy a one-bedroom condo, and a year later you have a baby on the way, or you decide to work from home and need an office. If your home no longer suits your needs, you will have to sell and move sooner than planned. This can be stressful and costly.

2. Extra Costs

Selling a home involves costs like real estate commissions, legal fees, moving expenses, and possibly repairs or upgrades to make your home more appealing to buyers. If you have to sell your starter home just a few years after buying it, you may not make a big profit. Sometimes, breaking even can be tricky, especially if market conditions have changed.

Alternatives to a Starter Home

If you are not sure that buying a starter home is right for you, consider these alternatives.

1. Buying a Forever Home Right Away

Instead of buying a small condo now and moving up later, you could wait a bit longer, save more money, and buy a home that fits your long-term plans. Yes, it may take more time, and you might have to continue renting, but you could skip the stress of having to buy and sell multiple properties. Buying a home that you can grow into might mean spending less on moving, commissions, and renovations over the long term.

2. Renting and Saving Longer

Renting is not “throwing money away” if it helps you reach a bigger goal. By renting, you have time to save a larger down payment. A bigger down payment can mean lower monthly mortgage payments later. Also, while renting, you can take your time to study the market, look at different neighbourhoods, and decide what kind of home will best suit your lifestyle for years to come.

3. Co-Buying and Shared Ownership

Another option is to pool your resources with family members or close friends. Co-buying a property may allow you to purchase a bigger place that can serve as a long-term home. Of course, co-ownership comes with legal and personal risks, so you must be careful and set clear agreements. But for some, this path can be a good way to enter the Toronto housing market without having to start small.

Financial Considerations

Before deciding whether to skip the starter home stage, think about your finances.

Mortgage Rates

Mortgage rates can have a big impact on what you can afford. Even a small difference in the interest rate can change your monthly payments a lot. It might be worth waiting until you have a better credit score or more savings to qualify for a lower interest rate. That way, when you do buy your home, you can get the best possible terms.

Down Payments

The size of your down payment matters. A larger down payment reduces the amount of your mortgage and can help you avoid extra costs, like mortgage insurance. If you cannot make a large down payment now, buying a cheaper starter home might seem tempting. But if you wait, continue to save, and possibly earn more money over time, you might be able to afford a nicer home from the start.

Final Thoughts

Deciding whether to skip buying a starter home in Toronto is not a simple yes-or-no choice. It depends on your financial situation, family needs, and long-term goals. Some will find that a starter home is the perfect stepping stone, while others will prefer to hold off until they can afford a place that truly fits their future plans.

If you feel overwhelmed, remember that you do not have to face this decision alone. The Johnson Team is here to help guide you, offer expert advice, and work with you to find the perfect solution for your unique situation. Their track record in the Toronto real estate market, strong reputation, and focus on client needs make them a trusted partner in your home-buying journey. They can help you navigate the market, handle all the details, and ensure your real estate experience is both positive and profitable.

If you are ready to start your journey toward finding the right home — whether it is a starter home or the one you plan to stay in for many years — now is the time to reach out. To start working with an agent right away, please contact us.