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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2000 Goose Ridge, Bozeman, Montana 59715

2000 Goose Ridge, Bozeman, Montana 59715

2Bedroom(s)
2Bathroom(s)
20.94Acre
1,971Sqft
Amongst the trees atop Goose Ridge you’ll find this beautiful mountain property. Built in 2001 on over 20 acres this 1,971 sq ft 2 bedroom, 2 bath log home is both comfortable and spacious. A partially covered wraparound deck steps down to an outdoor fire pit. The great room offers a lovely venue to take in expansive Absaroka views.
$845,000

27 Noble Peak Drive, Bozeman, Montana 59718

27 Noble Peak Drive, Bozeman, Montana 59718

4Bedroom(s)
2Bathroom(s)
0.26Acre
2,152Sqft
Beautiful 2020 built farmhouse in a quiet location in sought-after Woodland Park. Enjoy the rural and mountain views from the 11,000+ sqft lot that is fully fenced, sprinklered, and landscaped. The home is light, bright, and elegantly appointed in every detail. The open concept floor plan allows a nice flow between living spaces and access to several outdoor areas.
$779,000

2440 Tschache Lane 302, Bozeman, Montana 59715

2440 Tschache Lane 302, Bozeman, Montana 59715

2Bedroom(s)
1Bathroom(s)
1,063Sqft
These homes have modern finishes and open floor plans. The site is surrounded on 3 sides by a city park and open space, allowing for awe-inspiring views in nearly every direction. All of this from a central location within walking distance from shopping, restaurants, and retail. Start your day with Starbucks coffee (only a block or so away).
$460,000

333 New Ventures Drive, Bozeman, Montana 59718

333 New Ventures Drive, Bozeman, Montana 59718

2Bedroom(s)
1Bathroom(s)
0.81Acre
1,088Sqft
Many opportunities on this Four Corners Commercial Zoned Property! The property is currently laid out to feature (3) rentals for either short and/or long term. The 1st structure is a custom crafted cottage with many details throughout with super efficiency, charm & functionality.
$925,000

3401 Fallon 1B, Bozeman, Montana 59718

3401 Fallon 1B, Bozeman, Montana 59718

2Bedroom(s)
1Bathroom(s)
936Sqft
Awesome opportunity to own in Bozeman! This single story main floor 2 bed, 1.5 bath condo has an easy floor plan. Brand new carpet just installed and washer & dryer are included. 1 car detached garage plus parking on street. Fireplace will keep you warm and cozy this fall! Conveniently located close to MSU, mall/shops, grocery and restaurants with Ferguson Farms/The Market just down the road.
$310,000

404 Fieldstone Drive, Bozeman, Montana 59715

404 Fieldstone Drive, Bozeman, Montana 59715

4Bedroom(s)
2Bathroom(s)
0.24Acre
2,134Sqft
Are you looking for more than just a tract home? Do you recall as a child riding your bike down tree-lined streets in a quiet, safe neighborhood? How about the Ice Cream truck driving down the street bringing all your friends outside for a frozen treat? Well, we can't turn back the hands of time, but we have the next best thing.
$675,000

5443 Vahl Way, Bozeman, Montana 59718

5443 Vahl Way, Bozeman, Montana 59718

4Bedroom(s)
1Bathroom(s)
0.12Acre
2,924Sqft
Spectacular setting, home, and neighborhood. This 2019 Parade of Home's entry allowed no detail to be overlooked. Custom additions on this home will provide so much enjoyment and value to the lucky new owner. From the office at the front entry of the home, which showcases one of the lakes, to the spacious great room, kitchen and dining combination; the views abound.
$1,049,900

3024 S 31st Avenue, Bozeman, Montana 59718

3024 S 31st Avenue, Bozeman, Montana 59718

3Bedroom(s)
2Bathroom(s)
0.10Acre
2,128Sqft
Encounter Gran Cielo, Bozeman’s newest neighborhood. Where contemporary design meets classic community. Located in the heart of all that Bozeman offers, with easy access to everything. The Lagom N1 is 2,128 sq ft, offering 2 living areas, 3 bedrooms, 2.5 bathrooms with office space.
$775,000

1802 W Lincoln Street 13, Bozeman, Montana 59715

1802 W Lincoln Street 13, Bozeman, Montana 59715

3Bedroom(s)
1Bathroom(s)
1,349Sqft
Beautifully remodeled 3 BR, 1.5 BA townhouse-style condo adjacent to Montana State University. Stunning kitchen renovation with all new black stainless appliances, new counters, new soft-close cabinets, new tile flooring, new canned LED lighting and a massive pantry with a custom alder sliding barn door.
$407,000
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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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Equal Housing Opportunity Bozeman Real Estate Agent Liz Nitz
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