Starting off modestly vs. buying a more expensive property

Starting off modestly vs. buying a more expensive property

Starting small can be a smart financial move. There is a lot to be said for intentionally buying well within your means. Although, in a world where bigger is considered better, this can be difficult.

Most of us are familiar with the capital growth scenario below. This example can encourage people to take out a large loan where they can only afford to make the minimum repayment.

However, we have seen plenty of amazing examples where new home owners have started off with a smaller loan size and worked hard to put as much of a dent in their loan balance as possible.

The following example in the table below illustrates our point.

Taking a ‘stepping stone’ approach where you build up equity in a modest property and then use that capital to upsize into a more expensive home might be a sound strategy. Certainly, this method does mean that your ‘dream home’ may take longer; however, you minimise the risk of having a large debt.

If you would like specific advice about the pros and cons of starting off modestly, versus buying a more expensive property, please give your Smartline Adviser a call!

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DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.