Pay down mortgage?

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#1 Mon, Sep 5, 2011 - 10:08am
unknownrider
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Pay down mortgage?

Hello all and happy labor day!

Here's my dilemma ( and it's a good problem to have):

I have almost 80% of the cash needed to pay off my mortgage of 5.12% over 30 years. I'm trying to decide whether to a.) use all of it to pay against the mortgage, or b.) use half of it and invest the other half in PMs.

I know some of you might say " invest all of it in PMs " but I would feel really foolish if I lost this money that I have worked so hard to save of. My job industry is very fickle and the idea of having my home paid off is really attractive. Also, are there any legal or other reasons not to pay it off or down?

Thanks 

Edited by: unknownrider on Nov 8, 2014 - 5:06am
Mon, Sep 5, 2011 - 10:29am
HiHo_Silver
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Rider, I would HIGHLY

Rider,

I would HIGHLY recommend that you sign up for this free mini course by Daniel Ackerman. I went through the whole series and it has really changed my investment strategy for the better. Why pay off a mortgage now when it will actually help you turn inflation into wealth? Better to wait a few years and then pay it off with a few ounces of gold.

https://mortgagesecretpower.com/aHome.htm

HIHO

HiHo So what? We're just a few trillion short.
Mon, Sep 5, 2011 - 10:54am (Reply to #2)
unknownrider
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Many thanks. I'll take a

Many thanks. I'll take a look. byw, are we getting another margin hike soon? I'm long SLV in my trading side of the house. 

Mon, Sep 5, 2011 - 1:31pm
Captain Benny
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My situation

A new house can be bought, built, or rented in the future. Its wealth will be derived from the rules that man has placed upon the earth and man's perceived value of the land and labor to build it. You can buy, build, or rent such a home pretty much anywhere on this planet with wealth that maintains its purchasing power. Precious metals have quite the history of preserving purchasing power. (I also believe silver to be far more valuable than gold, because it actually has very specific properties required for technology)

Reversing this logic cannot be done. You cannot construct precious metals. Today you can lease it (if your super wealthy), but one day that will be gone. Of the three things mentioned in paragraph one, the only remaining thing you can do would be to buy them in the future.

If you're interested in preserving wealth, realize that your home is not it. Instead use your mortgage to help leverage your true wealth accumulation.

Also -- Get out of SLV and buy physical. Roll yourself into physical, because the squeeze is coming and ultimately physical is all that matters. I don't recommend PSLV anymore due to the incredible premium, its actually cheaper to buy the real bars.

My situation is this: I bought my house about 2 years or so ago and my wife and I could pay off our mortgage within a year if we wanted to. No way we're going to do that. We're saving to build a home outside the US where we can live modestly and hopefully retire young. Its taking huge sacrifices so far and will probably take a few more, I have absolutely no intention to pay off that mortgage.

Mon, Sep 5, 2011 - 1:51pm
SilverFocker
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Between now

And 3 weeks from now you will get yet another reason to not pay off that mortgage and further invest in physical PM's. As attractive as it is with your savings now, you are in a very good position cash happy to take advantage of the buying opportunity that now exist. 

Mon, Sep 5, 2011 - 2:08pm (Reply to #4)
Strongsidejedi
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pay down of banking debt or extend and pretend

There's a few ideas that I have on this topic of when to pay down debt and when to extend and pretend.

Paying down debt is a good thing if you are buying out the cost of carrying the note. My current view is that if the debt load is costing you the opportunity to convert fiat to PM's, then the debt load should go. On the other hand, if the debt load does not eat your ability to purchase PM's, then the debt load should be revised, debt extended, and the margin going to PM's.

The issue is that the interest rates and cost of carrying the note might free up revenue to plow into PM positions. Provided that you can secure the few coins you really purchase, then you could hold that PM position and have better performance on the PM held long than the liquidation of the banking debt.

I can put this another way.

If the US Government is going to play "revise and extend" tactics on us citizens, then we can use the IRS 1031 exchange rules to "revise and extend" our tax implications of holding real property. As a prominent real estate investor in this area told me, "why in hell would I pay my taxes now if I can roll that tax into subsequent years?" "I would rather pay those taxes in devalued FRN's than in current. If you can hold off and roll the tax implication for ten years, you would be saving a tremendous amount of capital!"

Think about this... if you paid off a $10,000 bank note in 2008, you could have purchased about 12 ounces of gold instead. You could then sell that gold in 2011 for $23,000 for a whopping 110% gain in 3 years.

If you took that same $10,000 and paid the bank note off, you would then have nothing to show for it but no debt and lower credit score from the annualcreditreport.com report. Basically, if you bought the 12 ounces of gold in 2008, you could trade it for some Fannie Mae REO today and have it represent payment in full.

The issue is the opportunity cost lost by paying a bank for their usury.

The other issue with the mortgage note is that you might be experiencing significant improvement in taxes by paying the note (mortgage interest write off is significant). I do know people who use that mortgage interest write off in a way that it sets up the margin which they are using to buy PM's monthly.

Mon, Sep 5, 2011 - 2:11pm
kingbee4
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Mortgage

Why are you afraid of losing the savings? Wealth preserved in PMs is not easily lost. And that house is not without risk either. It could depreciate, if you can't pay the taxes it can be lost to the state etc.

I will not pay off my mortgage until silver is above $300, or maybe not until 100 dollar bills are lying in the streets. It is a 5 % fixed rate interest and in the long run our dollar will be destroyed so might as well sock it to the banks and pay it off with toilet paper dollars someday. Be careful where you put that money so it is well preserved. And as stated above, put it in physical. I would not even have your trading money in SLV. It is not real wealth preservation and actually helps the banks suppress the price of silver. Do yourself and all of us a favor and convert to physical.

Mon, Sep 5, 2011 - 4:25pm (Reply to #2)
Poor Boy
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HiHo

Thanks for posting that link. Just got the first installment and it was interesting and I do understand the point that's being made. It's difficult to accept that paying off a mortgage is probably not too smart. Very difficult but also understandable logic.

I'm looking forward to seeing more.

That's worth a hat tip!

Tue, Sep 6, 2011 - 8:45am (Reply to #5)
unknownrider
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Thanks for the reply, what

Thanks for the reply, what happens 3 weeks from now?

Tue, Sep 6, 2011 - 8:53am (Reply to #4)
unknownrider
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Thanks Capt- Problem is, I

Thanks Capt-

Problem is, I know I need to buy some physical in a bad way, just keep waiting for a tiny bit of a correction. Missed the last drop in gold to the low 1700s. Work out of town got in the way. That work thing is really annoying and really gets in the way of a lot of important stuff! Anyway, thanks to all for the great inputs. Hat tips to all.

Fri, Sep 9, 2011 - 12:37am
dabblingman
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15 year?

Hey!

Might I suggest looking into taking some of the $ to pay down your principal so that you qualify for a 15-year mortgage. I was reading that the rates for those are down to mid 3% range. You could be paid off way sooner, still hold on to your free capital, and pay less in interest over the years.

Just a thought. Best of luck!

Dabblingman

Fri, Sep 9, 2011 - 8:19am (Reply to #2)
unknownrider
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Dear Hiho- Love that handle,

Dear Hiho-

Love that handle, anyway I'm through the second " reading " of the Daniel Amermen course, thanks for that, but the second reading talks about the present and future tax on gold, then gives some prettty grim extrapolations about what 'could' happen in the future when one tries to cash in his/her gold for fiat. Wonder if you or anyone else have thoughts on this. BYW, I'm enjoying the readings, but hope to God he's not going to try to sell me the life insurance/loan crap in the end. Regards.

Sat, Sep 10, 2011 - 9:07am
ouchtouch
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I would not pay off the

I would not pay off the mortgage early but I would keep enough in dollars to cover at least a few years of payments. Nobody really knows over the short term how quickly the dollar/gold ratio will change, and in which direction. Best to diversify. Keep in mind that there is one hell of a lot of debt in the world denominated in $US, and that means that as a simple matter of arithmetic, the $US can strengthen significantly in the mother of all margin calls. I expect gold and silver to strengthen along side the $US, but nobody knows for sure. It is easy to predict hyperinflation as the end game, but we could see a lot of deflation i.e. dollar strengthening before that happens.

Sat, Sep 10, 2011 - 7:51pm
Brotha Bob
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Mortgage interest and taxes

Depends upon you mortgage interest tax shield. If you pay down the mortgage you will loose some of the interest tax shield. Ie, you will be paying a lot less in interest the lower the balance is. Something to consider. You will be paying more taxes without that deduction. I would look at what price you reasonably project PMs to go to. Is $10k gold, $1k silver reasonable? I don't know. Others have predicted that. But, how many ounces would you need in $10k gold to pay off the house? Buy that. Keep the rest of the cash as dry powder. If Operation Twist works, you might refi at a lower rate. Which would mean a lower monthly payment, and more free cash to buy PMs. Cash on hand will make the refi process easier.

May God Help Us All But, what do I know?
Thu, Sep 15, 2011 - 6:06pm
Rear Flank Downdraft
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Good Conversation Here....

I am in an ongoing conversation with a buddy, who is a stacker, and is pretty much wholeheartedly of the same worldview with the economic ills as I, but he is dawg-set on saving the rest of his fiat and paying off the mortgage. He is actually about 80% or more saved up as unknownrider is. He has been doing so to take advantage of a savings rate return that had been higher than his mortgage interest. And the difference between us is that he's been saving for much longer than I for that end, and got to save when % yields were 5% and somewhat worthwhile.

Now, even if I wanted to, why in the world would I want to save fiat to an account earning less than 1%? With a real inflation rate somewhere near 9%, I'm losing out by saving, am I not?

I realize the need to diversify and have some cash. Furthermore, that strategy to pay down the mortgage by saving at a higher percentage than my interest rate on the note (4.75%) ain't workin' no more, and won't through 2013 thanks to the Bernank. Worked back in the day, but doesn't look as solid now. Even keeping the mortgage for a hyperinflationary situation is an option as mentioned here.

But that presupposes I still have a job in those conditions, especially if my job depends on my clientele having jobs (which it does to a certain extent). Now, being gainfully employed, I can pay my mortgage, (have no other debts) and have $ left for PMs. But there is still this feeling that harangues me to "get out of the debt." It's tough, because, either way, I seem to be hedging my bets: will we go hyperinflationary? Will PM's go exponential? What if I lose my income, etc.? What if the golden horde ensues? 

Ok, I digress a wee bit wink, but I am grateful for this thread nonetheless and have been needing some like minds to process this with.....

Thu, Sep 15, 2011 - 11:32pm
SilverFocker
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@ Rear Flank

I see the "to payoff or not to payoff" a mortgage as an issue in understanding what is going on globally.

If one believes that paying it off now in todays dollars vs dollars 10-20 years from now, I would say go for it, only IF you have what you think is enough PM's IF SHTF.

A few weeks ago, we had some friends over......one was building a new home due to job transfer, so the talk of mortgages and money came up. She asked me why I stopped paying the extra amount I was for so long on my mortgage.........she asked, if you think things are getting as bad as you say, are you not worried about the governments ability to send your retirement check......I was kind of amazed at the question "she really is a smart lady"......I replied that if Uncle Sam could not afford my retirement, the last thing on my mind would be my mortgage as that will be the day the dollar ceased to exist, so any extra PM's I bought with those extra mortgage payments will most likely pay off any remaining balance when the reset comes. 

How much is enough PM's? Who knows. What we do know is the future is bleak at best, and that this crap we see can go on longer than most think as all the worlds countries are in vogue with the term "Debt is good, GDP be damned" the whole world is now TBTF, until it's not.

If the banksters are not willing to pay me for saving, then I will trade that option to invest the savings into PM's and reverse the game, as every oz I get is one less they get a chance at.

In the meantime while we wait for the implosion, I will pay my fixed rate mortgage as agreed......with devalued dollars.