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So we're buying out first home in Montana with a 30-year FHA 4.25% (5.3% APR) and I am signing the loan documents tonight. The loan comparison page informs me in 5 years I will paid off $26k of our ~$300k loan.
I realize this is better than throwing money down the rental well, but it does shatter the illusion that we bought a house when in fact we bought a loan.
I know I should be more excited, but knowing this area appreciates very slowly does sort of drive it home a little harder.
Still, it will feel good not being a rootless renter making other people rich.
The first time you realize you can change something without permission, the first time you realize you have more privacy, don't have neighbor noise through walls, underneath, overhead, no more landlord or rent hikes to deal with, when you can first take the mortgage interest deduction on your tax return (its highest at the beginning of the loan and drops slowly) you'll start to feel the difference. In a pinch, home equity is something you can borrow against. Don't dwell on how much of the loan isn't paid off. Realistically, you probably won't be in that home long enough to pay it off anyway. You may sell it and move into another.
FHA *is* only slightly better than renting. With the mip & the exposure to repair costs, the "average" homebuyer who moves in just 5-7 years walks away with pretty much nothing after sales fees, repair costs & even including tax deductions. The only way to beat the system is to buy under your ability to pay, pay extra at every opportunity & refi out asap, as well as staying in place for longer than average. Combine those tactics & expensive (initial) financing still makes sense.
If you *don't* have a plan beyond making the minimum payments, then you *do* have a plan (for failure).
I do plan to pay more than the minimum when possible. I may get a small windfall from a family member to whittle away another $20k or so on the loan in the next year.
My instinct was to buy a less expensive property, but they all seemed to be in less desirable areas. With this property we are in sandwiched in a desirable, house-proud neighborhood. The property itself is very well maintained, truly a labor of love, with owners who only sold due to health reasons. We managed to "bump" the first bidder due to a contingency clause, and from what I understand there were three offers made right after ours.
Rents in this area were skyrocketing. Two years ago we had a 3000-sq ft rental with 5BR on a river for $1450. At best recently we were looking at 3BR average suburb dwellings for $1300.
My mortgage payment will still be less than I paid for years renting in another state for a 2BR (on the same job income) so this feel right despite the loan interest shadow over my head.
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Rents in this area were skyrocketing. Two years ago we had a 3000-sq ft rental with 5BR on a river for $1450. At best recently we were looking at 3BR average suburb dwellings for $1300
This is exactly why I bought, and probably paid a tad too much, maybe 1.5%, but not so much to set off appraisal alarms. That was 4 years ago. Where I was renting has already matched my mortgage payment and where I live now, rent well exceeds my payment. I don't have a whole lot of equity. I did a 3% down, no PMI (LPMI) at 3.875%. When the tax benefits are factored in I am well ahead in the rent v own comparison.
But not everyone is meant to own, but it's better to recognize the fact before signing the largest note you will likely ever sign (unless it's the next home).
Ownership gives you a lot more control of your destiny.
Holding title to dirt brings many more protections than you have in a tenant/landlord relationship.
I have helped buyers whose PITI for comparable properties is less than the rent they paid. Nice.
But, a fixed 15 or 30 year loan is more than a cash flow proposition. Even with slow appreciation, your payment is a hedge against inflation.
You should build equity with every payment, equity that is not particularly liquid, but is there for you in case of a life event that forces you to move.
And, you can pay off a mortgage, with only maintenance and property taxes as your housing expense.
You can never amortize your rent, control your rent cost, etc.
All that said, ownership is not for everyone. It should be an informed decision made with many factors considered, including personal preferences for sure. But, if one knows they will be in one place, one area, for the long haul, it does have benefits in security.
Happy to hear you bought a place op. It will pay off eventually. Did you buy in great falls?
We bought in Kalispell. Too gray during winter for my tastes, but the natural resources are abundant and stunning.
Realtors told me a lot of his buyers are escaping overgrown but otherwise rural places like Colorado to move there. More and more people are able to work remotely (which is what I do) and so they can bring their own job, but many tap out after a winter or two.
We almost, and I mean 95% chance, moved back to sunny CA and familiar friends and places before we found this house. But I just couldn't swallow the idea of renting a 2BR in CA for $2150/m for a family of four, and we didn't have the emotional bandwidth to start over somewhere new like Texas.
We bought in Kalispell. Too gray during winter for my tastes, but the natural resources are abundant and stunning.
Realtors told me a lot of his buyers are escaping overgrown but otherwise rural places like Colorado to move there. More and more people are able to work remotely (which is what I do) and so they can bring their own job, but many tap out after a winter or two.
We almost, and I mean 95% chance, moved back to sunny CA and familiar friends and places before we found this house. But I just couldn't swallow the idea of renting a 2BR in CA for $2150/m for a family of four, and we didn't have the emotional bandwidth to start over somewhere new like Texas.
Wow! What a beautiful place. We are looking to buy next year in great falls. Moved here recently from Helena, before that we were in Bozeman area. My husband is from here, but until 2009, I was a Cali resident for 35 years. Born there. So I totally understand what you're saying.
Prices are through the roof in CA. So glad you were able to move out here and get a great place!
Oh and last winter was brutal in Helena, but I love it here.
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