Intro to Bozeman

Creating Wealth as a First Time Home Buyer

by Liz Nitz

Over the weekend, I taught a first time home buyer seminar.  I love helping first time homebuyers get into their first home because it means so much not only emotionally but also financially. It is the start of a secure financial future that can help you all the way through your retirement.  Now is a particularly good time to purchase a home as interest rates are at multi year lows, inventory is better than it has been in a while, prices are still increasing but at a less rapid rate and there are plenty of low downpayment programs and down payment assistance options.

I want to focus today’s blog though on exactly how and why you are creating wealth as a first time home buyer and is an important building block of your portfolio and financial future.

The example that I used in the seminar is pictured on this white board photo and I will bullet point it out so it makes sense.

 

Case #1 – Rent

First assumption is that a person rents an apartment for $1000 a month.

The $1000 goes to the landlord.

The benefit received by the renter is a place to live.  The renter is not paying off a larger debt to eventually own the home outright. ( Unless this a very rare lease to own situation)

There are no tax benefits associated with paying rent.

 

Case #2 – Purchase home with financing , usually from a financial institution.

This person has purchased a home with lender financing and pays $1000 a month to the lender.

 

What happens to that money is the interesting part

Part of it (I am using $500 a month in my example below) goes to the bank as interest to pay the bank for using their money.  But the other part of the $1000 payment goes to pay principal on your loan.  Principal is the part of the purchase price that you borrowed to purchase that house. Every principal payment increases your ownership in the house as you owe the bank less with each payment you make.
In my example, $500 a month goes to principal which turns into $6000 a year.  In the space of one year, you have will have reduced your debt by $6000 and that continues for as long as you have that loan.

So that’s a bit of wealth creation right there as you own more and more of a valuable asset.  The money that you pay off is considered your equity in your home.

 

But that’s not all…you will also be able to take advantage of an appreciating real estate market.

I know we all like to complain about rising home prices but did you think that the flip side is that if you actually own a home with the help of a lender, the rising home prices increase the value of your home too!  And guess what, the bank doesn’t get any of that, its all yours!

 

You may not touch that equity and wealth for many years but you may want to consider what it can do for you.

Some examples :

  • The equity that you earn simply by paying your mortgage and letting your home appreciate may provide a large down payment for your next home, say if you needed another for a growing family.
  • It can help pay for a second home or an investment property
  • The equity from the first home may help pay for kids schooling
  • It can serve as nice retirement nest egg

 

To recap the benefits that one gains from paying a mortgage over rent:

  • The interest portion of your payment is tax deductible
  • The principal portion of your payment pays off debt (good for the credit score), increases your ownership in that house and creates wealth as your equity builds
  • The value appreciation which increases your equity in that home belongs only to you, not the bank.
  • You have a solid financial wealth tool that can be used later for when you need it.

 

 

That first home with very little down can be a springboard to financial security down the road.  Purchasing a home is really one of the best leveraged investments you can make.  Now is a great time to take advantage of this just because of the all of the positive market conditions and available money at low rates.

Please reach out and let’s talk more about more about creating wealth as a first time home buyer!

 

Check out my website and blog https://movemetomontana.com

For more on mortgage rates, check here  http://www.mortgagenewsdaily.com/reports/newsletter

 

 

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The following homes listed below were just listed in the last 7 days. This seller’s market is hot so we keep a close eye on the latest inventory. Subscribe below for instant updates of your ideal criteria.

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1582 New Holland Way, Bozeman, Montana 59715

1582 New Holland Way, Bozeman, Montana 59715

3Bedroom(s)
2Bathroom(s)
0.16Acre
1,685Sqft
Stunning brand-new to be built, home, located in a convenient in town location. Walking distance to the Gallatin Regional Park, Dinosaur Playground, Dog Park and ponds. Homes feature shaker cabinets, quartz counters, luxury vinyl plank flooring. 8 foot doors throughout! A generous Master suite with huge walk-in shower, dual vanities and spacious closet. Good size living, dining, kitchen areas.
$487,500

1560 New Holland Drive, Bozeman, Montana 59715

1560 New Holland Drive, Bozeman, Montana 59715

3Bedroom(s)
2Bathroom(s)
0.12Acre
2,015Sqft
Stunning brand-new home to be built, located in a convenient in town location. Walking distance to the Gallatin regional park and Dinosaur playground. Home will feature shaker cabinets, quartz counters, luxury vinyl plank flooring. Main level has a 1/2 bath, living, dining, kitchen. Stainless appliances, enormous garage.
$525,951

402 Meriwether Avenue, Bozeman, Montana 59715

402 Meriwether Avenue, Bozeman, Montana 59715

3Bedroom(s)
3Bathroom(s)
0.13Acre
1,864Sqft
This townhome is in the heart of Bozeman is estimated to begin construction in November 2020. Units will include modern finishes such as LVP flooring, stainless appliances, granite counter tops, decks for entertaining, and a full landscape package. Interior units are 1,588 sq. ft. with 2-bedroom, 2-baths with single attached garages. Exterior units are 1,864 sq.
$435,000

432 Meriwether Avenue, Bozeman, Montana 59715

432 Meriwether Avenue, Bozeman, Montana 59715

3Bedroom(s)
3Bathroom(s)
0.10Acre
1,864Sqft
This townhome is in the heart of Bozeman is estimated to begin construction in November 2020. Units will include modern finishes such as LVP flooring, stainless appliances, granite counter tops, decks for entertaining, and a full landscape package. Interior units are 1,588 sq. ft. with 2-bedroom, 2-1/2 baths with single attached garages. Exterior units are 1,864 sq.
$435,000

1704 Lincoln Street C1, Bozeman, Montana 59715

1704 Lincoln Street C1, Bozeman, Montana 59715

2Bedroom(s)
2Bathroom(s)
1,041Sqft
Sweeping views of the Bridger Mountains from this brand new condo complex, and incredibly well located; just a short walk from the Bozeman Fieldhouse. These new construction condos boast dual bedroom ensuite. Bathroom shower and floor are tiled, and shower doors are glass.
$339,500

1704 Lincoln Street B8, Bozeman, Montana 59715

1704 Lincoln Street B8, Bozeman, Montana 59715

2Bedroom(s)
2Bathroom(s)
1,041Sqft
Sweeping views of the Bridger Mountains from this brand new condo complex, and incredibly well located; just a short walk from the Bozeman Fieldhouse. These new construction condos boast dual bedroom ensuite. Bathroom shower and floor are tiled, and shower doors are glass.
$339,500

1704 Lincoln Street B3, Bozeman, Montana 59715

1704 Lincoln Street B3, Bozeman, Montana 59715

2Bedroom(s)
2Bathroom(s)
1,041Sqft
Sweeping views of the Bridger Mountains from this brand new condo complex, and incredibly well located; just a short walk from the Bozeman Fieldhouse. These new construction condos boast dual bedroom ensuite. Bathroom shower and floor are tiled, and shower doors are glass.
$339,500

1704 Lincoln Street B2, Bozeman, Montana 59715

1704 Lincoln Street B2, Bozeman, Montana 59715

2Bedroom(s)
2Bathroom(s)
1,041Sqft
Sweeping views of the Bridger Mountains from this brand new condo complex, and incredibly well located; just a short walk from the Bozeman Fieldhouse. These new construction condos boast dual bedroom ensuite. Bathroom shower and floor are tiled, and shower doors are glass.
$339,500

1704 Lincoln Street B1, Bozeman, Montana 59715

1704 Lincoln Street B1, Bozeman, Montana 59715

2Bedroom(s)
2Bathroom(s)
1,041Sqft
Sweeping views of the Bridger Mountains from this brand new condo complex, and incredibly well located; just a short walk from the Bozeman Fieldhouse. These new construction condos boast dual bedroom ensuite. Bathroom shower and floor are tiled, and shower doors are glass.
$339,500
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Windermere Downtown logo Bozeman Real Estate Agent Liz Nitz

Windermere Downtown Bozeman

135 E Main St.

Bozeman, MT 59715

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