I've lost a chunk of equity in my home over the last several years (as I'm sure most folks have - I bought probably near the market high). While I'm not underwater, I have lost most of my equity such that I can't refinance without coming up with a sizeable down payment and I'd like to take advantage of current interest rates and bring down my monthly mortgage payment.
I've saved enough to put some money down, but am wondering if I should use the money to pay down some of my home mortgage, refinance and lower my monthly expenses or if I should hold the money and "stack" instead.
I guess my question is given where we're at right now, would you prioritize reducing debt and monthly mortgage payments or building up precious metal ownership?
Thanks! Love Turd's site and the community.
And to make things worse, I have a 10-year note on my house which needs to be paid in full by spring of 2014, EEEK!
Fortunately, housing prices in my area have rebounded a bit recently and I'm hopeful I can refinance into a traditional mortgage, currently working with a local credit union to do so.
In your position, assuming you already have a somewhat reasonable mortgage payment and no time-bomb facing you (like mine), I would probably opt to keep my money and pay the extra hundred or two a month. The only reason I'm refinancing is because I have no choice, but even last year, when they wanted $15K extra for me to do so, I said "no thanks" and waited. Glad I did.
I've typed and deleted a bunch of stuff already, but really it's a complex problem that you have. You have to weigh the consequences, and play what if games. The fact that you are already in a contract-mortgage means you have already chosen a path.
The only way to lose equity is if you are forced to sell. You might get some breathing room in some market improvement in the future. If you can refi at a better rate with some effort, then that's probably the target to go for.
I would target the lower interest rate and aim for a 30 year fixed. The 15 year fixed might be more attractive for your situation. I remember 18% prime rates in the 70s. What seems high now might not be in two years.
While you are saving I would hold my comfort zone in stackables and cash. If there is a large dip in the equities (Stocks) then my comfort level would get some of those into the mix. Watch and develop a sense of what equities you would target.
There are so many factors at play here that some answers aren't going to be clear. You have to find every answer that you can clearly identify for yourself. What timeline is your target for refi? How much will you need?
Will the economy drop some more, or will it improve? The answer is yes. Will precious metals rise or will they fall? The answer is yes.
Sleep on it then look at the answers you have written down and adjust. Take care of yourself with physical activities that you don't use for work. Eat well for your age-group and make your own food. Do you have your preps? Water-shelter-food for 2-weeks or 2-months etc. With stacking do have some, but you can start small with silver-coins and build from there.
While you may have bought at a price that appears to be high, this too may change. I'm underwater on my stack but not my house. I watch long term trends for prices when it comes to PMs, real estate, equities etc.
Good fortunes to you. I hope this helps.
One thing you could consider is:
1. Stop paying the mortgage, just pay the taxes.
2. Find another place to rent, move to another state and rent this place out.
3. After the house goes into foreclosure, declare bankruptcy in your new state of residence.
If the bank is in foreclosure proceedings, you will not "loose" the house and will still be able to rent it as long as you continue to pay the taxes. Most likely, they will not take title as long as the place is under water. Having a second mortgage holder certainly helps.
I know quite a few who have been doing this for years (yes years!!).
Most people with a conscience have a hard time living like this, but that is way things are.
It depends on how fast they foreclose in your area. Some banks are really slow to take the loss, so if you can, then take advantage of that.
If you are smart, you will save all the rental income and use it buy a new place after the bankruptcy clears...
This path is not for everyone and may not work, it all depends on how desperate/devious you are.
Ask any realtor for help, they all know what is going on here.