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Gold & Silver vs Mortgage


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6 hours ago, cravethatcoin said:

This is a great topic. I am in the same boat myself.

I am 1 year into my mortgage, unfortunately I wasn't able to make a overpayment last year as I had to invest a lot into renovation costs. I hope this year to be able to hit the maximum 10%. Haven't purchased any gold/silver since buying the house but I have a very good stack as a base and would prefer to direct any funds towards overpayments. If I am able the reach the 10% this year I will likely save any remaining for next years 10%

1 year becomes 10 in no time. I wish you all the best on your journey. And looking at the other posts on this thread , if you can overpay then it seems to be worth it. The only downside is the stacking will have to go on the back burner. 

Kev

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To be clear, you CAN overpay by 10%, but there are additional fees are levied that make it punitive. The lender is going to get their money out of you one way or another! 

One option is just stack it as cash and then make a large lump sum overpayment at the end of the discount term, but of course this requires quite a degree of discipline and is not without opportunity cost.

The mortgage merry-go-round model expects you to remortgage at the end of every discount period and incur an additional £1000 product fee each time. This kinda adds up if all you ever do is pay the scheduled amount and reset the mortgage to the standard 25 year each time you remortgage.... Don't play their game. In fact, as already suggested, if you are confident that you can pay it earlier than 25 years, take out a shorter term mortgage like 15 years. Live well within your means, buy as little house as you are comfortable in, and overpay the bastard by 10% to get it all paid off within 8 years like we are about it. As maths dictates, the overpayments made in in the early years of the mortgage have the biggest compounded effect over the life of the mortgage, so set up the overpayments from day 1!

I'm just about old enough to remember 16% rates too. Even as a stanch Austrian business cycle believer I find it hard to see rates climbing this high again in our lifetime, or at least it means the end of the local currency as we know it, but in terms of withstanding economic stress, I look at how well protected we against the general population. Would I be in the first 50% of people to be wiped out? Nope. 75%? I'm still sure I wouldn't. 90%? Again, I'm pretty sure I wouldn't. Given our positive cash flow and simple unleveraged lifestyle, I'm confident that we would be in the top 5% able to withstand a cataclysmic financial shock.

If you also prepare yourself sufficiently then there is no need to fear the next downturn, because with it will come unbelievable opportunities for those in a position to take advantage.

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1 hour ago, KevAg said:

Being new to the PM market I've stacked a few numismatic coins. Is there a reason why sovereigns are easy to sell? What is the attraction about them that allows quick sales?

16% is scandalous, I'm sure my parents told me interest rates practically doubled overnight.

Do you honestly believe with the world's current economy that they could put rates up that high? 2007/2008 was obviously bad resulting in low % rates. But to go from just over 1% to 10%+  In today's market wouldn't happen? Or would it!

My wife is from Argentina, and she is about to return there for 2 weeks. Interest rates are currently at 60%. 60%! Do you think is a choice willingly made by their government?

That is the rate that is being set by the price of their bonds on the free market. The illusion of modern monetary theory is that governments and central banks are free to set whatever interest rate they deem most appropriate for the economy. This is just BS. The interest rates are set by the money markets, the central banks are just a part of the machine. The markets one day decided that Greek debt was good, and the next day decided that it wasn't. Same in Argentina. One day they may decide that US debt is no good, or UK debt.

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19 minutes ago, vand said:

The mortgage merry-go-round model expects you to remortgage at the end of every discount period and incur an additional £1000 product fee each time.

Totally forgot about the charge to change. The last time I remortgaged the best deal was with my existing provider. So I'm sure the fee isn't applied. (At least as a one off payment).

As you say, the merry-go-round of remortgage fees would soon add up if you change your provider every 2 years as an example but don't reduce the period of time the loan is over. 

60% is ludicrous! I dread to think the implications a rise to 10% would cause to the u.k economy. Although it isn't impossible for rates to go that way I really don't think they will. In my opinion at least. The ramifications would be disastrous to say the very least

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9 minutes ago, KevAg said:

Totally forgot about the charge to change. The last time I remortgaged the best deal was with my existing provider. So I'm sure the fee isn't applied. (At least as a one off payment).

As you say, the merry-go-round of remortgage fees would soon add up if you change your provider every 2 years as an example but don't reduce the period of time the loan is over. 

60% is ludicrous! I dread to think the implications a rise to 10% would cause to the u.k economy. Although it isn't impossible for rates to go that way I really don't think they will. In my opinion at least. The ramifications would be disastrous to say the very least

Yes, much like the Mutual Fund industry, you can get killed on fees if you're not very careful. They are all too happy to make it frictionless, ie, roll it into the loan. Then you end up paying the interest on it over the life of the mortgage, and if you are undisciplined and play their merry-go-round game and remortgage 10 times that is a nice £10,000 on top of your mortgage skimmed off the top just for the industry. All for no up front cost. It's a truly wonderful business model, this fractional reserve banking!

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39 minutes ago, vand said:

Yes, much like the Mutual Fund industry, you can get killed on fees if you're not very careful. They are all too happy to make it frictionless, ie, roll it into the loan. Then you end up paying the interest on it over the life of the mortgage, and if you are undisciplined and play their merry-go-round game and remortgage 10 times that is a nice £10,000 on top of your mortgage skimmed off the top just for the industry. All for no up front cost. It's a truly wonderful business model, this fractional reserve banking!

How it's legal is beyond me.

The benefits of paying the mortgage off asap are becoming increasingly more important. These little charges here and there for the remortgage clearly add up to a substantial amount over time. It would be interesting to find out what the average interest payments over the life of a 25 / 30 year mortgage actually equate to. Granted house prices are different but the % paid over the term would be relevant to the house owned. A 30 year term with a remortgage every 2 years could possibly be upwards of 15k. Then the % paid on current rates fluctuates. There is one hell of a lot of 'interest' over the duration of a mortgage. The banks do clearly get the penny and the bun.

Kev 

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4 hours ago, KevAg said:

Being new to the PM market I've stacked a few numismatic coins. Is there a reason why sovereigns are easy to sell? What is the attraction about them that allows quick sales?

16% is scandalous, I'm sure my parents told me interest rates practically doubled overnight.

Do you honestly believe with the world's current economy that they could put rates up that high? 2007/2008 was obviously bad resulting in low % rates. But to go from just over 1% to 10%+  In today's market wouldn't happen? Or would it!

In the 1960's, a time i am only distantly aware of, UK inflation was low, it was actually low, 1 - 3%, not the made up figures of today. This is the last time there was real growth in the economy. People were working and making things. In the 1970's as a child i can remember talking to my grandmother about inflation and that it made no sense to save as prices were going up so fast. Inflation was over 20%. Silver had come out of all circulating currencies in the 1960's. Then in 1971 Nixon decoupled the USD from gold and so the world decoupled from gold. A deal was done with Saudi Arabia to sell oil in dollars. A story there was an oil crisis/shortage was invented and oil prices were quadrupled. The massive rise in oil prices created demand for dollars to buy this oil, which was the point of the oil price rise. The huge rise in oil prices sent a shock through world economies and we saw inflation and stagflation as economic activity declined.

i have seen roller coaster rides in inflation and interest rates. We have had artificially low interest rates since the 2007/08 debacle. If you look at the Chapwood Index http://chapwoodindex.com this is a proper cost of living index, the way they used to be and it gives actual inflation in various American cities. It has averaged over 10% for the last 5 years. The official inflation numbers are massaged and fake. The inflation i see with my own eyes is much higher than the official figures. The inflation i see in the grocery shops in Spain is much higher, it would not surprise me if it was well over 10%. If this level of inflation were accepted it would mean interest rates would go to over 10% and debt interest would implode the world economy. So we currently have what are negative interest rates on savings and bond investments. The whole edifice is unstable.

We could see interest rate go up a lot. We could see interest rates go up a lot b/c they should be much higher and at the same time we could see house prices fall a lot. They are way too high. Higher interest rates means higher default rates. This means more properties arrive on the market and force sales cause price to fall. We could see negative equity as we have seen before. i don't suggest get shut of your mortgage for this reason, i say that b/c sh1t happens in people's lives.

Always cast your vote - Spoil your ballot slip. Put 'Spoilt Ballot - I do not consent.' These votes are counted. If you do not do this you are consenting to the tyranny. None of them are fit for purpose. 
A tyranny relies on propaganda and force. Once the propaganda fails all that's left is force.

COVID-19 is a cover story for the collapsing economy. Green Energy isn't Green and it isn't Renewable.

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1 hour ago, sixgun said:

 i don't suggest get shut of your mortgage for this reason, i say that b/c sh1t happens in people's lives.

Sorry if I have missed something in the rest of your post, I'm not massively clued up on the financial world. Do you mind elaborating on the quoted text? What benefit do you see in not getting rid of the mortgage? Do you mean a paid for house with a possibility of negative equity prevents future moves? Or are there other reasons which I didn't grasp from the post. 

Kev

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14 minutes ago, KevAg said:

Sorry if I have missed something in the rest of your post, I'm not massively clued up on the financial world. Do you mind elaborating on the quoted text? What benefit do you see in not getting rid of the mortgage? Do you mean a paid for house with a possibility of negative equity prevents future moves? Or are there other reasons which I didn't grasp from the post. 

Kev

i suggested it would be a good idea whilst you are flush to get your debts down. If you can pay off the mortgage that is a very good thing. Your financial future is on a much firmer footing. Things happen in life. You can have a good income stream, life is great and then something happens. It happens. It has happened to me more than once. The first time i had little to no debt - it was easier to pick myself up. The second time i had a lot of debt. What made that worse i could have very easily got rid of all that debt 10 x over when the going was good. That debt almost took me down.

Now that is on a personal level. You could lose your job, have an accident, an illness, a divorce, get put in jail, your business go bust and so on. Any number of things could happen.

The second reason is what can happen to interest rates, the economy, lending, the property market and so on. Not personal to you but obviously this will affect you if you have a mortgage. i didn't suggest (at the outset) you get rid of mortgage b/c interest rates could quadruple and house price halve - but when you factor that in as well it would be a good idea to be the king of your castle and own it outright as well.

Always cast your vote - Spoil your ballot slip. Put 'Spoilt Ballot - I do not consent.' These votes are counted. If you do not do this you are consenting to the tyranny. None of them are fit for purpose. 
A tyranny relies on propaganda and force. Once the propaganda fails all that's left is force.

COVID-19 is a cover story for the collapsing economy. Green Energy isn't Green and it isn't Renewable.

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15 hours ago, HelpingHands said:

What happens if you pay the max 10% over and any extra you put into something else. 

Can you then pay a lump off as the fixed term is expiring without penalty?

Ok..always read your terms and conditions (or just phone up and ask)...I once made an LSR (lump sum reduction) the day after my 5 year fixed rate expired without penalty. This was because (with the major bank I was with) after a fixed rate expired the mortgage would automatically roll over onto the banks SVR  (standard variable rate) which incurred no ERC (early redemption charge). I sat on this rate for a few days then took another fixed rate...so in answer to your question..PROBABLY!

Note: my comments are based on what I did 7+ years ago and things may have changed, all depends on what you signed and when.

 

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2 hours ago, Nick1368 said:

I'd stop buying PM and sell all my stack and get rid of any debt I have including the mortgage.

Totally agree, pay the mortgage off before you do anything else, it’s a no brainier. 

You will be shocked at the dosposable income you have once it’s paid off, not to mention the lifting off of that massive yoke around your neck doesn’t half let you sleep well at night 😁

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10 hours ago, Nick1368 said:

I'd stop buying PM and sell all my stack and get rid of any debt I have including the mortgage.

That's a very inflexible and intolerant position to have. You might as well argue that people should not buy housing with mortgages but save up the cash to buy them outright. 

There is nothing wrong about debt and it can be the smart thing to hold if it is used to produce a higher future return than the cost of paying the interest.

 

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6 minutes ago, vand said:

That's a very inflexible and intolerant position to have. You might as well argue that people should not buy housing with mortgages but save up the cash to buy them outright. 

There is nothing wrong about debt and it can be the smart thing to hold if it is used to produce a higher future return than the cost of paying the interest.

 

Totally agree with @vand here. With interest rates so low i find it better to invest money elsewhere for greater returns than the 1.6% interest i pay on my mortgage. One thing i would suggest is to get to the 50/60% equity mark if your not already as that makes you eligible for the best possible rate from most lenders. Obviously EVERYONE is different, along with their situations but theres some pretty good advice on here and only you know whats best for you. I think someone posted the article about investing vs paying your mortgage off. I choose to invest but you may choose not to. Good luck either way!

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16 minutes ago, vand said:

That's a very inflexible and intolerant position to have. You might as well argue that people should not buy housing with mortgages but save up the cash to buy them outright. 

There is nothing wrong about debt and it can be the smart thing to hold if it is used to produce a higher future return than the cost of paying the interest.

 

That’s one way to look at it and obviously it’s a personal choice and each situation is different, I only said what I would do in a situation like this.

I personally like to focus on one thing at a time, so if I had a mortgage, the mortgage would be all I think about, I would save every penny I can to get rid of that mortgage as soon as I can, once that’s done I’ll think of another sort of investment.

 

 

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Whenever I read about the ball and chain of having a mortgage, is it even worthwhile buying a house at all these days? It is painted as the holy grail of your life but it all seems like a loan scam to me. The only way I would buy a house is if I could afford to buy it outright. Until then I'd much rather have gold.

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37 minutes ago, Nick1368 said:

That’s one way to look at it and obviously it’s a personal choice and each situation is different, I only said what I would do in a situation like this.

I personally like to focus on one thing at a time, so if I had a mortgage, the mortgage would be all I think about, I would save every penny I can to get rid of that mortgage as soon as I can, once that’s done I’ll think of another sort of investment.

  

 

I understand that you would rather hang yourself than take on unnecessary debt.. as you say it's personal finance. There is more than the maths of it, there is the risk profile and personal preference to take into account, but such an extreme argument against debt is just a folly as saying you should leverage up to the eyeballs and not worry about it because housing tends to go up in the long run.

There sensible truth is that the best risk/reward profile for the vast majority of people should stand somewhere away from either of those extremes.

If you want to cross a busy road you don't run out into the middle without looking, nor do you wait until 3am when no cars are around. You pick something in the middle when there is a sensible gap in the traffic. Yes its possible that you could trip half way across, break your ankle not be able to crawl to the curb in time and still get run over, but your risk/reward profile deems it worth it.

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48 minutes ago, bluemoon said:

Whenever I read about the ball and chain of having a mortgage, is it even worthwhile buying a house at all these days? It is painted as the holy grail of your life but it all seems like a loan scam to me. The only way I would buy a house is if I could afford to buy it outright. Until then I'd much rather have gold.

Again, a bit of, dare I say, dogmatic and uneducated position to hold.

You have to live somewhere, and that means either renting or buying your housing. 

The right time to Rent is when the cost of renting the house is cheaper than the cost of renting the money to Buy the house outright, ie when rent is less than mortgage interest (on a 100% loan).

There are other variable of course - the transaction cost of buying, whether your would want to buy the house that you rent etc, but from a purely finance point of view this is the calculation that you should be keeping tabs on. 

 

 

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1 hour ago, bluemoon said:

Whenever I read about the ball and chain of having a mortgage, is it even worthwhile buying a house at all these days? It is painted as the holy grail of your life but it all seems like a loan scam to me. The only way I would buy a house is if I could afford to buy it outright. Until then I'd much rather have gold.

You must be a great saver as house price inflation where I live far outstrips my ability to save.

Example...

Bought current house in 2004 for approx £250k

House value now 2019 approx £500k

Interest paid on mortgage very little, as took a Bank of England base rate tracker at 0.39% over base 8 years ago.Prior to that nothing over 3.99%.

So, would need to have started saving £1389 a month since 2004 to pay cash for house today, plus would have to have rented somewhere on top of that..another £1500 for something similar ...best of luck if you can do that.

My advice to my children will be to get on the housing ladder ASAP...and pay of the mortgage as fast as you can. BUT DONT ASK MUM DAD FOR THE DEPOSIT!

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As others have said pay the mortgage.

I was fortunate enough to be mortgage free by the age of 36 (now 42), I cannot stress enough how different I looked at life knowing that I didn't have the monthly repayment. 

Everyone is different and I obviously don't know your circumstances, your job security/transferable skills etc. I had my first mortgage at 18, got repossessed at 21 so had a huge incentive to get rid of my mortgage, really didn't want to go through that again!

Cheers

Dk

 

 

 

 

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Comparing rent and ownership I see it like this; you need shelter for your family it's a need not a want, you pay for it either by buying a house, or you rent there is no escape. If you buy and use a mortgage like most of us, the bank is your landlord, so it's all rent, only the mortgage has an end date and the cost goes down over time.

Each month the interest on a mortgage is reduced as you pay back the capital, when as rent may go down, but more likely goes up. The capital you repay on mortgage becomes equity you own, a portion of shelter cost is given back to you effectively. The interest is the rent part, reducing each month. 

A house to live in is not an asset though regardless. It is an expense you either pay for by owning and having to maintain, or you pay for it in rent that is calculated to cover such costs. 

House prices may crash some day, I hope so, but if you have high equity there is no reason to care, as the whole market will get cheaper which means moving will ultimately be no harder. It only matters if you are in negative equity and can't remortgage. Interest rates are the other risk, but you know that unless government brings in rent controls, you are going to suffer the effect to some degree whether you own or not. A mortgage holder can fix today's interest rate for many years reducing the risk, renting you are always exposed. 

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will gold go up more than the interest you will pay?   probably not.    get mortgage paid then think again.     all very well people saying only paying 3% or so on money but thats what it is now the banks will always get their money somehow so if its not in interest so could add other charges in future.  

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9 hours ago, DonkeyKong said:

As others have said pay the mortgage.

I was fortunate enough to be mortgage free by the age of 36 (now 42), I cannot stress enough how different I looked at life knowing that I didn't have the monthly repayment. 

Everyone is different and I obviously don't know your circumstances, your job security/transferable skills etc. I had my first mortgage at 18, got repossessed at 21 so had a huge incentive to get rid of my mortgage, really didn't want to go through that again!

Cheers

Dk

 

 

 

 

Kudos for finishing the mortgage after the early bad luck. Much respect to you

Kev

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7 hours ago, Cornishfarmer said:

will gold go up more than the interest you will pay?   probably not.    get mortgage paid then think again.     all very well people saying only paying 3% or so on money but thats what it is now the banks will always get their money somehow so if its not in interest so could add other charges in future.  

Agreed. Although there is a lot of speculation surrounding the possible boom of currency if it reverts back to a gold/silver standard. Although that remains to be seen. Part of my collection of metals is purely to save money that hopefully follows inflation. As I don't see returns from keeping it in the bank. And as for shares, I'm not experienced enough to take the risk. If something seems to good to be true, more often than not it is. In my opinion of course.

Kev

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12 hours ago, DonkeyKong said:

cannot stress enough how different I looked at life knowing that I didn't have the monthly repayment. 

I completely agree, what @DonkeyKong says 

It is absolutely impossible to explain the feeling you have and the emormouse sense of personal and family security you get when you finally pay off the mortgage and you own the roof over your head unless you have experienced it first hand.

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