Buy PMs or pay off house?

[68Camaro]

A very similar thread/question was posted recently, within a couple of months? I'm too lazy to post duplicate sets, as well as to go try to find the other thread. It's there if someone wants to look for it. Needless to say, there are widely differing opinions.

A lot of the diffferences of opinion seems to be a strong tendency of people to believe that their personal/local situation applies uniformly to the rest of the country at all times.

For example, the statement above - "in the right market and in the right price range, real estate still sells quickly". I don't know what that really means, but I do know that in Florida, if you bought a house in the 2004-2009 period you will only be able to sell if you're taking a massive haircut (which I had to do on a house in 2011). Are there exceptions?, sure - a house down the street sold for cash with no dickering in days after being on the market, but that was the exception rather than the rule. The rule is take a 40-70% haircut and 12-18 months on the market.

Lending standards back to historical norms? I'm not seeing it. Again, this may be regionally dependent, but both my personal experience as well as everyone that I've talked to that has applied for or gotten a real estate loan within the past two years says that the banks really DON'T want to lend. Both my wife and I have impeccable credit and actually didn't even need the loan - could have paid cash - but it took an incredible effort with really invasive paperwork to complete a small-ish loan about 15 months ago. I don't see ANYTHING at a historical norm.

As to the OP topic, that is where there are no absolutes. Needs to be covered case-by-case. But I could personally have paid off my mortgages but instead chose to use the funds for overall prepping in general, which includes PMs. Doesn't do me any good to have a paid-off house and no food to live through the crash, and no savings for the post-crash era.

[PMLurker]

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.

Best sentence in the entire thread!

In my experience banks will lend to you if you have assets to back up the loan. They have learned their lesson in the real estate mess and will do their homework on you before they lend you money unlike before when any minimum wage earner could get a mortgage. This is a good thing. People that are financially responsible (pay their bills on time, low debt, good credit history, employment history, etc.) will be able to get better terms on loans then those that are not.

Consumers overextending themselves with debt they could not pay back were as much at fault for derailing the economy as the "greedy bankers" were.

The market value of your house really only matters when you are going to sell.

Unless you are still living in your parents house, you will have a monthly bill to pay whether you are renting or paying a mortgage.

The mortgage on our house is by far our largest monthly expense. Having that paid off would allow us quite a bit of flexibility to use that money for other purposes. Instead of writing a check to the mortgage company, we would essentially be writing a check to ourselves every month.

PMs investing is very volatile. You can certainly make quite a bit of money if you time it right, but you can also lose quite a bit if you time it wrong.

[frugi]

i also wanted to add an addition to my earlier post about www.naca.com ,,,,If you have no credit, or bad credit, or whatever, you still get approved at a APR that is 1% below prime, and a fixed 30 year mortgage, no matter what......if anyone needs to buy a house this is the way to go.....

[frugalcanuck]

In my experience banks will lend to you if you have assets to back up the loan. They have learned their lesson in the real estate mess and will do their homework on you before they lend you money unlike before when any minimum wage earner could get a mortgage. This is a good thing. People that are financially responsible (pay their bills on time, low debt, good credit history, employment history, etc.) will be able to get better terms on loans then those that are not.

[/quote]

I fall into that category
I was blown away at how hard it was to get a small loan if you dont have land or are buying a car with it. I wanted the loan to invest in a high yielding dividend stock. I asked for $5000 and showed them my on the books cash and stocks were over 10 times that amount and could easily pay it but they only would give me a decent loan if I were to buy a car. They were offering me a loan at 13.5% which would negate the dividend. This was last year

[Nickelmeister]

In my experience banks will lend to you if you have assets to back up the loan. They have learned their lesson in the real estate mess and will do their homework on you before they lend you money unlike before when any minimum wage earner could get a mortgage. This is a good thing. People that are financially responsible (pay their bills on time, low debt, good credit history, employment history, etc.) will be able to get better terms on loans then those that are not.

I fall into that category
I was blown away at how hard it was to get a small loan if you dont have land or are buying a car with it. I wanted the loan to invest in a high yielding dividend stock. I asked for $5000 and showed them my on the books cash and stocks were over 10 times that amount and could easily pay it but they only would give me a decent loan if I were to buy a car. They were offering me a loan at 13.5% which would negate the dividend. This was last year[/quote]

It's all about security. Cars can drive off, never to be seen again. Land tends to stays put

[barrytrot]

In my experience banks will lend to you if you have assets to back up the loan. They have learned their lesson in the real estate mess and will do their homework on you before they lend you money unlike before when any minimum wage earner could get a mortgage. This is a good thing. People that are financially responsible (pay their bills on time, low debt, good credit history, employment history, etc.) will be able to get better terms on loans then those that are not.

I fall into that category
I was blown away at how hard it was to get a small loan if you dont have land or are buying a car with it. I wanted the loan to invest in a high yielding dividend stock. I asked for $5000 and showed them my on the books cash and stocks were over 10 times that amount and could easily pay it but they only would give me a decent loan if I were to buy a car. They were offering me a loan at 13.5% which would negate the dividend. This was last year[/quote]

I don't think you would ever (1900's, 2000's, whatever) have gotten a bank to loan you money against a dividend producing stock. If you need a loan to buy stock just go on margin and you have extra money immediately, generally at preferential rates. So your experience has nothing to do with the economy.

[68Camaro]

To all those in this thread that are saying that secured real estate loans are either "easy" to get, or have returned us back to some "norm". What the banks SAY in their advertising is one thing. What they actually DO is something totally different. Have any of you actually gotten one of those loans within the past two years? If not, you may be missing a lot that has changed in the past few years. I went through it 15 months ago. Before that I had secured loans in 2005, and in the early-mid 90s, and three times in the 80s. The experience of Nov/Dec 2010 was unlike anything I've ever experienced in my life, as well as what I recall of my parents and grandparents experiences. I've related this in detail in a couple of prior threads.

[tractorman]

A lot of the diffferences of opinion seems to be a strong tendency of people to believe that their personal/local situation applies uniformly to the rest of the country at all times.

If I had enough gold to turn into real estate around here, I would do it in a heartbeat. I'm not talking about a house or some office building though.

[John_doe]

I would pay off the house then stack capital. Interest is why so many Americans struggle financially imho.


Banks run this scam on a daily basis, they will cut interest rates so you will re-finance. It's legal slavery, if you fall for it.

[Bluegill]

To all those in this thread that are saying that secured real estate loans are either "easy" to get, or have returned us back to some "norm". What the banks SAY in their advertising is one thing. What they actually DO is something totally different. Have any of you actually gotten one of those loans within the past two years? If not, you may be missing a lot that has changed in the past few years. I went through it 15 months ago. Before that I had secured loans in 2005, and in the early-mid 90s, and three times in the 80s. The experience of Nov/Dec 2010 was unlike anything I've ever experienced in my life, as well as what I recall of my parents and grandparents experiences. I've related this in detail in a couple of prior threads.

I have friends in real estate. You sir are 100% correct. Their stories of deals falling apart days before the closing are the norm, not exceptions. We're talking buyers putting 20% down, stable good paying jobs and credit ratings in 800 range.

[Engineer]

To all those in this thread that are saying that secured real estate loans are either "easy" to get, or have returned us back to some "norm".

Circumstances are affected by locality, Camaro. I wouldn't lend money for property in Florida either.

This area had the misfortune (or possibly fortune) of having a major industry leave during the start of the real estate boom, which prevented the big property runups in the first place. When the bust hit, prices dropped ~10% and we never had much of a problem with foreclosures. Jobs are relatively easy to find, and the banks are lending.

All I'm saying is that neither one of us can make absolute statements based on our limited points of view.

[frugi]

To all those in this thread that are saying that secured real estate loans are either "easy" to get, or have returned us back to some "norm". What the banks SAY in their advertising is one thing. What they actually DO is something totally different. Have any of you actually gotten one of those loans within the past two years? If not, you may be missing a lot that has changed in the past few years. I went through it 15 months ago. Before that I had secured loans in 2005, and in the early-mid 90s, and three times in the 80s. The experience of Nov/Dec 2010 was unlike anything I've ever experienced in my life, as well as what I recall of my parents and grandparents experiences. I've related this in detail in a couple of prior threads.

www.naca.com

Guaranteed approval @ 1% below prime fixed 30 year mortgage!

[PMLurker]

Have any of you actually gotten one of those loans within the past two years? If not, you may be missing a lot that has changed in the past few years.

My brother just got a mortgage two months ago. Technically it's not me, but I can speak of his experience. He didn't have any major issues but was pretty stressed about the whole process as the bank was in a rush to get all his financial info but took a long time to come through with the appraisal price of the house (which matched what his realtor told him).

Banks will loan good borrowers money. They are a business and this is how they make money. Banks are not giving home loans that do not adhere to 80% of Loan To Value (LTV). The bank has their own appraiser who can have a different opinion than the broker's appraisal. Before closing, if there are foreclosures or short sales nearby, this will drive down the "value" of the home. If the loan falls out of the 80% LTV ratio either the buyer has to pony up the capital to cover the difference or the seller agrees to renegotiate or they will not get the loan.

The sellers, buyers, realtors, appraisers and banks all need to be on the same page for everything to work, but unfortunately this is not always the case.

[dan53]

Ask your bank that gave you the loan and ask for an amortization sheet on the loan. This will show how much of your monthly payment is going towards priniciple and how much is going toward interest. Usually, at the beginning of the loan, a disproportionate amount will be going toward interest. Lets say you have a payment of $1000.00. Its not uncommon for as much as $900.00 to be going toward interest and $100.00 towards principle. So in this example, if every month you send in an extra $100.00, it eliminates $900.00 in interest and shortens the loan by one month. You really need to get an amortization sheet. I got this info from a book called: "The Banker's Secret".

PS: These kind of savings used to be most pronounced when interest rates were high. Hence the need for an amortization sheet.

[68Camaro]

Have any of you actually gotten one of those loans within the past two years? If not, you may be missing a lot that has changed in the past few years.

My brother just got a mortgage two months ago. Technically it's not me, but I can speak of his experience. He didn't have any major issues but was pretty stressed about the whole process as the bank was in a rush to get all his financial info but took a long time to come through with the appraisal price of the house (which matched what his realtor told him).

Banks will loan good borrowers money. They are a business and this is how they make money. Banks are not giving home loans that do not adhere to 80% of Loan To Value (LTV). The bank has their own appraiser who can have a different opinion than the broker's appraisal. Before closing, if there are foreclosures or short sales nearby, this will drive down the "value" of the home. If the loan falls out of the 80% LTV ratio either the buyer has to pony up the capital to cover the difference or the seller agrees to renegotiate or they will not get the loan.

The sellers, buyers, realtors, appraisers and banks all need to be on the same page for everything to work, but unfortunately this is not always the case.

Exactly... Now what does this really mean? What it means is they want to know EVERYTHING about you. They are completely in your pants. You provide them everything they want, regardless of how stupid it is, how difficult it is, or invasive it is. Provide your tax return - yep you'd better believe it. They don't trust just your bank statements or your pay stubs. Ah, but trust your copy of tax return? - nope. They require you to allow them to request the IRS release the IRS copies of your tax returns directly to them. You do it to their schedule. If they forget to ask something and the schedule is delayed, and something you've provided goes outside the acceptable time window, it's not their problem it's your problem, and you might have to start all over. You might lose the deal because of it. It's ridiculous. It's absurd. It's appalling. And I wouldn't do it ever again if I have a choice. Stressed? If you've not been through it, you have no idea... This is not "normal'.

[frugi]

www.naca.com <--------absolutely the only way to go, I did it, it works, it is made to benefit the buyer, not the bank.

1% below prime APR fixed for 30 years. no closing costs. no money down.

[Engineer]

Exactly... Now what does this really mean? What it means is they want to know EVERYTHING about you. They are completely in your pants. You provide them everything they want, regardless of how stupid it is, how difficult it is, or invasive it is. Provide your tax return - yep you'd better believe it. They don't trust just your bank statements or your pay stubs. Ah, but trust your copy of tax return? - nope. They require you to allow them to request the IRS release the IRS copies of your tax returns directly to them. You do it to their schedule. If they forget to ask something and the schedule is delayed, and something you've provided goes outside the acceptable time window, it's not their problem it's your problem, and you might have to start all over. You might lose the deal because of it. It's ridiculous. It's absurd. It's appalling. And I wouldn't do it ever again if I have a choice. Stressed? If you've not been through it, you have no idea... This is not "normal'.

All that invasiveness is due to one thing...its a bureaucratic overreaction to people scamming the system at all levels. Banks looked the other way or even encouraged people to lie on loan apps, and then sold them to the big banks who wrapped them up in AAA paper and passed them along to the other suckers. Now that the government is backstopping nearly every mortgage written in the US, its bound to keep getting more intrusive.

The only way I can foresee the process getting simpler is to force banks to hold their own paper.

[everything]

Right now, I would make sure you are the lowest interest rate possible, with inflation and debasing, the dollars you owe will just continue to be worth less and less over time. Keep an eye on how much interest you are paying though, that's money you'll never see again.
I opted to get rid of my mortgage, sold the house, finally realized, being single, I can get by with much less, and have considerable more disposable income.