Buy PMs or pay off house?

[Nickelless]

This thread started over on GIM, and I'm curious to know what you guys think. Here's a snippet:

http://www.goldismoney2.com/showthread. ... or-buy-PMS

I recently inherited some money, just enough to pay off my house or buy gold instead
or split it down the middle....my best choice?

My two zincs:

I'm in my second year of a 30-year fixed-rate mortgage at 4.625 APR. My payments are a fixed amount for the duration of the mortgage. I'm paying the minimum each month and buying PMs while they're still cheap. I'm not looking to sell my house at all--ever. I'm not looking to flip it for a profit and then buy another house. I'm staying right where I am. I'm not trusting the U.S. government to start acting fiscally responsible at this point in the game, so naturally I think that paper "assets" will soon revert to their intrinsic value and PMs will skyrocket as the dollar dies. Even if the dollar somehow hangs on for several more years, I've still got the same amount of PMs no matter how much the purchasing power of the dollar drops. If the dollar crashes, I can sell a fraction of my PMs to pay off my house and still have plenty of PMs left. If the dollar somehow (by suspension of reality) rebounds and regains the faith of economies around the world (I can hear Russia and China snickering), I still have the same amount of PMs. I think we're short on time to buy PMs while the supply is still relatively good and the prices are relatively low. History teaches us that all fiat currencies eventually die, and the U.S. dollar will be no different. I'd rather be wrong about the dollar and still have a stash of PMs than be right in my expectations but not having any PMs to show for what I expected to happen. I'm putting my money on history and buying as much in PMs as I can. I don't think it's possible at this point in the U.S. for that to be a losing course of action. The $100 trillion note from Zimbabwe that's on my office wall further confirms that for me.

What do you guys think?

[Cu Penny Hoarder]

Use those fiat dollars to buy something of value while they are still worth something.

No brainer... Buy the PMs!

[tractorman]

Either way, they have the right attitude. At least they aren't heading out to buy a new car and go on a cruise.

[Nickelless]

Use those fiat dollars to buy something of value while they are still worth something.

No brainer... Buy the PMs!

I totally agree, but quite frankly I'm surprised to see so many people on the GIM thread suggesting that debt be paid down first.

[Cu Penny Hoarder]

Use those fiat dollars to buy something of value while they are still worth something.

No brainer... Buy the PMs!

I totally agree, but quite frankly I'm surprised to see so many people on the GIM thread suggesting that debt be paid down first.

I agree with you... I say screw debt. The entire financial system could collapse shortly... I hope it does. People would be foolish to pay down debt right now, especially a mortgage with a low interest rate.

When gold dropped to $1550, I bought many pre-1933 gold coins using my CC. Then I tranferred the balance to another CC with a 0% APR for a year. So I got real money using a piece of plastic, interest free for 12 months.

[Engineer]

At the risk of getting flamed, I say pay off the house before you stack.

In the case of hyperinflation, the house/gold ratio will bounce around a bit but will eventually stabilize...and the banking cartel won't be out to crush the value of your house as soon as they get a new monetary system in place.

There's a lot of people out there carrying debt hoping for inflation to wipe it out, but I'm pretty sure our bought and paid for politicians will find a way to convert old debt into new debt when TSHTF.

[Silver Addict]

There's a lot of people out there carrying debt hoping for inflation to wipe it out, but I'm pretty sure our bought and paid for politicians will find a way to convert old debt into new debt when TSHTF.

If there is really high inflation, high enough to inflate away peoples debts, most likely the majority of the people will be jobless and lose their house before that debt can be inflated away. It would/will be enough challenge putting food on the table, let alone paying a mortage. I don't think there are alot of people in Zimbawe with free houses....


As for this situation, my answer is....It depends.

If you have no other PM's, stack
If you have a decent stack already...pay off the debt

I paid off my house almost a year ago. Took some silver profits between $40-$50 on the run up to the spike top.

[Engineer]

I paid off my house almost a year ago.

I did the same about 4 years ago, and it was worth it just for the stress relief. Waking up KNOWING that you don't have to go to work to keep a roof over your head makes life ever so much sweeter. There's also a great deal of liberty to be had in being able to smile while you look an employer in the eye and tell them that you work for them out of desire rather than necessity. I was able to start doing that in my late 30s, and have reaped years of great wages and working conditions in return.

On the other hand, I know plenty of people 10-20 years older than me who are still wage slaves...and their working conditions reflect their status. They're often intimidated, underpaid, and overworked, but they need their jobs to pay for their granite countertops and refuse to be swayed by the idea that they, too, could be free.

[Nickelmeister]

To me it all boils down to expected ROI.
If you think PMs will appreciate at a faster rate than your mortgage, put the windfall into metals.
Worst case scenario, you lose your income and have to dishoard to pay your mortgage.
Unless metals collapse of course, but I don't think many of us anticipate that.

[Nickelless]

To me it all boils down to expected ROI.
If you think PMs will appreciate at a faster rate than your mortgage, put the windfall into metals.
Worst case scenario, you lose your income and have to dishoard to pay your mortgage.
Unless metals collapse of course, but I don't think many of us anticipate that.

Good advice, Nickelmeister, but I'd like to point out that the original post was about someone ELSE'S windfall, not mine. The only "wind fall" I have are tree limbs in the yard. LOL

[Bluegill]

At the risk of getting flamed, I say pay off the house before you stack.

In the case of hyperinflation, the house/gold ratio will bounce around a bit but will eventually stabilize...and the banking cartel won't be out to crush the value of your house as soon as they get a new monetary system in place.

There's a lot of people out there carrying debt hoping for inflation to wipe it out, but I'm pretty sure our bought and paid for politicians will find a way to convert old debt into new debt when TSHTF.

+1

Folks need to keep in mind, wages never keep up with inflation. The cost of the necessities, food, utilities and gas could get so expensive you won't be able to keep making your mortgage payments regardless. And wait until all the bankrupt municipalities start jacking up property taxes...

Add that with the very real possibility of PM's being manipulated down and staying there for eternity. Along with the other very real possibility of PM's getting taxed and/or confiscated. Even if they don't, good luck selling them in a pinch and getting anywhere near melt value. Expect to take a good size hit converting to FRN's to pay your bills.

As Engineer mentioned, the relief from the removal of the burden of debt over your head cannot be overstated. One cannot put a price on ones mental and physical well being.

Each individual just needs to find a baalnce they can live with.

[justj2k78]

I owe just over $100k on my house. If I had that much fall in my lap, I'd pay my house off in a heartbeat. That would be one of the happiest days of my life.

I'm taking donations.

[Treetop]

At the risk of getting flamed, I say pay off the house before you stack.

In the case of hyperinflation, the house/gold ratio will bounce around a bit but will eventually stabilize...and the banking cartel won't be out to crush the value of your house as soon as they get a new monetary system in place.

There's a lot of people out there carrying debt hoping for inflation to wipe it out, but I'm pretty sure our bought and paid for politicians will find a way to convert old debt into new debt when TSHTF.

Im with you.... Instead of the monthly mortgage, buy PMs...

I DO believe your likely to do better holding the pms, but its no guarantee. heck the feds could order you to turn in PMs as well, they have before. Making any PMs held a black market deal. Likely? I dunno, but possible without a doubt.... Or price controls could be set with heavy fines for trying to get full value for PMs... who knows with the jokers we have.

I can understand why many at GIM would go with the mortgage. PMs are rather conservative imo in our current position, as would be paying off the mortgage.

I picture myself standing at a casino with my life savings, to I put it on silver/gold or a house. the house is a 100 percent win. the gold let say I have a 90-95 percent chance of winning, and potentially MUCH bigger then the house... Honestly i couldnt fault either choice... but Id go with the house, and buying silver/gold instead of a mortgage payment....

[nero12345]

So you have a fixed rate interest loan. I've studied the crash of the German currency after the war a little and from what I gather money as well as wages go crazy all at once. So if for instance your wage is $60,000. Then if money goes nuts your wage will go nuts to keep up with inflation. Soon you'll be making $120,000. But your mortgage will be the same with a fixed rate, your payments stay the same. What if your wage has to go up 100% to keep up with inflation. House payments will be a joke. Milk and bread on the other hand is a different story. I would say anyone that has a fixed rate long term mortgage will make out like a bandit. Think of that 1 trillion dollar Zimbarae bill. Does that cover the price of your house LOL.

[barrytrot]

Think of that 1 trillion dollar bill. Does that cover the price of your house LOL.

That is one GREAT summation!

And, of course, I and many others have 100 trillion dollar bills That's a couple house right there

[Nickelmeister]

Let's look at things from this vantage point:

Continuing to carry a mortgage, or borrowing capital against the equity in your home, is essentially shorting the dollar. You know, the worthless paper fiat illusion that almost everyone here believes is being inflated and printed into oblivion? Yes, that dollar

In today's interest rate environment, I personally believe that no one should own real estate outright. It is the cheapest, easiest and most liquid capital that most people have access to. I "own" my home, but use the equity to back a line of credit that I use to float my business. Churning those funds provides an ROI that is many multiple times the borrowing costs.

I'm not saying that the security of knowing your home is "yours 100%" isn't comforting, but from a net worth perspective having a $100K balance on your mortgage with $100K in PMs stashed away is essentially the same thing!

Like I've said, and some others have pointed out, the downside would be if PMs crashed and/or interest rates skyrocketted. But make no mistake, the decision to apply that windfall capital to closing out the mortgage is simply a wager of another type.

[Nickelmeister]

At the risk of getting flamed, I say pay off the house before you stack.

In the case of hyperinflation, the house/gold ratio will bounce around a bit but will eventually stabilize...and the banking cartel won't be out to crush the value of your house as soon as they get a new monetary system in place.

There's a lot of people out there carrying debt hoping for inflation to wipe it out, but I'm pretty sure our bought and paid for politicians will find a way to convert old debt into new debt when TSHTF.

Im with you.... Instead of the monthly mortgage, buy PMs...

I DO believe your likely to do better holding the pms, but its no guarantee. heck the feds could order you to turn in PMs as well, they have before. Making any PMs held a black market deal. Likely? I dunno, but possible without a doubt.... Or price controls could be set with heavy fines for trying to get full value for PMs... who knows with the jokers we have.

I can understand why many at GIM would go with the mortgage. PMs are rather conservative imo in our current position, as would be paying off the mortgage.

I picture myself standing at a casino with my life savings, to I put it on silver/gold or a house. the house is a 100 percent win. the gold let say I have a 90-95 percent chance of winning, and potentially MUCH bigger then the house... Honestly i couldnt fault either choice... but Id go with the house, and buying silver/gold instead of a mortgage payment....

Take a look at the US housing market over the past five years. It has not been a "100% win" for a great many people.

[Treetop]

Owning a home outright is a win imo. Obviously the value in dollars can change drastically. The house is still a hard asset though.

I will agree your more likely to do better with the PMs. likely much better. If the home is one you could stay in the rest of your life it is still the more solid option as I see it.

Now if we were talking about enough money to pay off PART of a home that is a whole other matter. Id have to go with PMs in that case. Rather then paying more to principle or sitting on cash to make payments with if other income sources dried up.

Im of a homesteader mindset, and grow much of my food. should be all of it after this next season. Part of my investment has been in collecting a wide range of fruits trees most likely to perform well here. It will be 2-7 years before I see a return on any of that. almost certainly silver or gold would prove the better pick from a financial standpoint, but established fruits and nuts cant be measured in dollars so easily imo. (treetop lol) I see owning a longterm home outright in the same light. Its more then just an investment vehicle.

[frugi]

we are SO close on the same type of mortgage.....mine is 4.129% APR fixed.....I bought my house through the NACA program which is super awesome. it is set up so that the principal is paid of first, not the interest first like so many others are..........If I inherited enough money to pay off my mortgage, I would do that in a heartbeat, it would make life so much easier knowing all I have to do is come up with my property taxes every year. whew! that would be great! I will never stop buying precious metals, it is the ultimate goal to ALWAYS be switching my fiat for real money, if my house was paid off that would be all the fiat I ever need, and it will be stored in the value of the house rather than sitting in the bank......i like property investments...........i also agree with you about the fact that I will never be selling my house, but I am saving up for making some acerage purchases in the near future, I want some "bug-out" land, 4 seperate tracts, each one in a different direction from my house with 5 acres at least and a spring, with woods.

[beauanderos]

You're already sitting on an asset that is irretrievable. No one can get loans on real estate anymore, at least not low, fixed rate ones. I would buy the PM's in a heartbeat (before they explode... or the dollar implodes). Now then, if you had a variable rate loan, that changes matters. Even then, if it was impossible to refi into a fixed rate, I wouldn't dump the whole amount immediately into metals, but use the money as a slush fund to make further purchases on dips. I agree, debt of any kind is shorting the dollar if the debt was incurred by conversion to real money. If you dump the whole lot into the home... you're STUCK there. Hope you like the location, because you just lost the liquidity of your assets. Homes are not going to appreciate pricewise other than nominally thru inflation for the coming decade. More likely we will continue the bottoming process for at least another two years.

[Engineer]

Owning a home outright is a win imo. Obviously the value in dollars can change drastically. The house is still a hard asset though.

I agree with the hard asset part. A house is always worth a house, and the cost of one doesn't tend to drop below the construction cost very often...unless you get silly and buy one in Detroit. You also have to be careful of booms and busts, but that's true with any investment.

I see owning a longterm home outright in the same light. Its more then just an investment vehicle.

Something I've never seen covered by the pundits is the dividend value of a house which is owned outright. Every month, it pays you a tax free dividend of free rent (minus taxes and maintenance). For me, that's about 5% a year on my investment in addition to any capital gains I might receive when I sell it. IMHO, that's a pretty good reward for such a low risk investment.

A house with a mortgage isn't nearly as good of a deal. Interest, PMI, and finance charges tend to eat up that 5% and then some. If you add price deflation into the mix, you're typically better off renting.

[Ardent Listener]

I can see all sides of the discussion. I would like to add the day that I became debt free was one of the best of my life. I would not sink my last dollar into either only PMs or to pay off a mortgage. Keep a reserve fund of cash too.

[Pennybug]

I've wondered often what I would do if... by God's grace... I were placed into this situation. Given that in this situation, the individual is NOT intent on moving... then I will assume that thier preperations and independence at that location are more than adiquate for their situation. That said, if I were in that situation, I would split it 10% back to God via my church and other ways 1st, 40% towards the house (looking into refinancing), 35% into PM's, and 15% into other preperations and/or vacation/fun (I'm sure others here think that I'm wrong here... but I FIRMLY belive that R&R is a DIRE necissity and you should enjoy life a bit while you can. After all... in a SHTF situation... fun time goes away). OK... why do it that way? I figure if I were to refi my house with 40% down, I'd end up with a house payment at about $300 or so a month (if I lost my job, with $30K or so in PM's, I'd be able to make that payment with PM's for a LOOONG time if need be. Also, if you've ever studied economics in depth (and I have at a Masters level), then you'd see the wisdom in what Nickelmeister is saying. Wise debt is NOT an enemy (you can profit from using debt)... OUT OF CONTROL debt IS. I could go off on that... but I'll spare that. Anyhow... I'm convinced thats what I would do if I came into that kinda moola.

[Silver Addict]

So you have a fixed rate interest loan. I've studied the crash of the German currency after the war a little and from what I gather money as well as wages go crazy all at once. So if for instance your wage is $60,000. Then if money goes nuts your wage will go nuts to keep up with inflation. Soon you'll be making $120,000. But your mortgage will be the same with a fixed rate, your payments stay the same. What if your wage has to go up 100% to keep up with inflation. House payments will be a joke. Milk and bread on the other hand is a different story. I would say anyone that has a fixed rate long term mortgage will make out like a bandit. Think of that 1 trillion dollar Zimbarae bill. Does that cover the price of your house LOL.

What do you think the employment rate would be in such a situation? My guess is quite low. Most would lose their house well before being able to pay it off. Any and all income would go to providing the most basics of needs, ie: food.

That is why anybody here (or anywhere) that wishes for hyper-inflation so that their PM's will skyrocket is not thinking about the ramifications of what would actually happen in such event.

[Engineer]

You're already sitting on an asset that is irretrievable. No one can get loans on real estate anymore, at least not low, fixed rate ones.

I disagree with the absoluteness of both of those sentences.

In the right market and in the right price range, real estate still sells quickly. In the wrong market and in the wrong price range, good luck. As Americans we've gotten used to the easy liquidity of the last decade, but just because lending standards have gone back towards their historical norms isn't a reason to think that the sky has fallen. The simple rule of thumb is that you shouldn't buy in any market where housing prices exceed 3X the prevailing wage, and you should always be careful not to buy in an area where the local industry is in decline. If you follow those two simple guidelines, it isn't too hard to make money on real estate.