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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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2316 Gallatin Green Boulevard 17, Bozeman, Montana 59718

2316 Gallatin Green Boulevard 17, Bozeman, Montana 59718

3Bedroom(s)
2Bathroom(s)
1,530Sqft
Beautiful 3 bed 2.5 bath 1530 square foot condo with an attached 2 car garage. This unit features gray cabinets, white hard surface countertops, stainless steel appliances for a great modern feel. Wonderful location close to walking trails, parks, gym, Costco, Target, etc. 3rd bedroom does not have a closet but seller with work with buyer and show them options. AC is an available upgrade.
$445,000

3271 Warbler Way A, Bozeman, Montana 59718

3271 Warbler Way A, Bozeman, Montana 59718

3Bedroom(s)
1Bathroom(s)
2,614Sqft
Introducing Skyline Vista, a luxury condo community located on the park in Cattail Creek. With over 2600 +/- sq. feet of living space these 3 bedroom condos live large with a long list of premium upgrades. First floor family room provides a great multi purpose room or office.
$775,000

289 Heights Circle, Bozeman, Montana 59718

289 Heights Circle, Bozeman, Montana 59718

3Bedroom(s)
2Bathroom(s)
0.61Acre
2,011Sqft
Custom Home with Additional Income Apartment and a Separate Office Space on .61-acres across from a 5-acre park! This home, built by Dan Jones, has a vaulted ceiling with alder stained trim and door package. The extra-large kitchen has quartz countertops, ceramic tile backsplash, and stainless-steel appliances. The living room features large windows and a beautiful rock fireplace.
$990,000

2938 Warbler Way 16, Bozeman, Montana 59718

2938 Warbler Way 16, Bozeman, Montana 59718

3Bedroom(s)
2Bathroom(s)
1,392Sqft
Elkhorn Condos are designed by Locati Architects. This is an end-unit 3 bedroom condo located near shopping and public transportation, trails, ponds, playgrounds. All bedrooms are located upstairs. There is a one-car attached garage. The main level includes a galley kitchen that opens to the dining and living room.
$445,000

102 N Chouteau Avenue, Bozeman, Montana 59718

102 N Chouteau Avenue, Bozeman, Montana 59718

3Bedroom(s)
2Bathroom(s)
0.23Acre
1,920Sqft
This home is calling you! It's centrally located with great access to all things 'Bozeman'. This is where neighbors come over for a 'backyard movie night' and sidewalks are filled with chalk drawings and people chatting. The outside has very nice curb appeal. The lot has plenty of mature trees and garden boxes. AND, how about your own water well for lawn and garden irrigation.
$699,000

3124 Augusta Drive, Bozeman, Montana 59715

3124 Augusta Drive, Bozeman, Montana 59715

3Bedroom(s)
2Bathroom(s)
0.25Acre
1,948Sqft
Located between downtown and the Bridger Mountains across the street from the Bridger Creek golf course, this single level home backing up to open space boasts an open floor plan and vaulted ceilings. The spacious living room features a gas fireplace and large slider out to your back deck to enjoy the views.
$850,000

986 Cassandra Ln Unit A, Bozeman, Montana 59718

986 Cassandra Ln Unit A, Bozeman, Montana 59718

3Bedroom(s)
2Bathroom(s)
1,769Sqft
BACKS TO OPEN SPACE! This condo feels more spacious due to its ideal location. Easy access to trails, parks, schools, and shops! Unit has 3 bedrooms and 2.5 baths and a 1 car garage.
$610,000

120 Kimball B, Bozeman, Montana 59718

120 Kimball B, Bozeman, Montana 59718

4Bedroom(s)
2Bathroom(s)
2,433Sqft
This charming 4 bedroom, nearly 2500sq/ft, condo is not one to miss. The beautiful kitchen features granite counter tops, and plenty of entertaining space. The bonus room on the east side of the condo is a wonderful addition to the living space of this home. The 2-car garage has plenty of space for all your toys.
$695,000

3155 Cattail A, Bozeman, Montana 59718

3155 Cattail A, Bozeman, Montana 59718

3Bedroom(s)
2Bathroom(s)
1,535Sqft
Great end unit in duplex building, with all new paint and carpet. Located in an established neighborhood with open space, trails, parks, ponds, and views. This place is move-in ready and awaiting your personal touches. Great light with lots of windows in this open main level floorplan with half bath on the main level.
$499,000
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Range Properties

135 E Main St.

Bozeman, MT 59715

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