Re: Looking for opinions on paying down mortgage. - Saab General Bulletin Board -

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Re: Looking for opinions on paying down mortgage.
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Posted by EGD [Email] (#663) [Profile/Gallery] (more from EGD) on Tue, 2 Feb 2021 11:04:41 Share Post by Email
In Reply to: Looking for opinions on paying down mortgage, Sam, Tue, 2 Feb 2021 08:42:41
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Legitimate questions, with one enormous factor that may come into play at some point. I’ll be rambling because I really do not have any answers, just speculation.

To start, I would respectively note, though, that by refinancing your home and using the equity to ‘pay down’ debt you’ve only reduced the interest rate on that debt; you have not actually reduced the total dollar amount that you owe.

That being said, if you locked in a fixed rate for 30 years, you are protected from the much higher interest rates I anticipate coming in the next few years. That will save you money. If you choose to pay it off in 15 years — at which point you’ll be 67 and most likely retired — you might consider a 15 year loan instead of a 30 year payback instead of just throwing extra money at the principal. That will save you thousands. You just need to decide if the home you’re in and where it’s located is where you want to be for the rest of your life. Either way, pay off your mortgage as quickly as you can.

The enormous factor I anticipate — and why I’m somewhat speculative at the point — is that I foresee several years of very high inflation (or even hyperinflation) in order to devalue our nation’s enormous debt load, and I don’t know of any reliable means of protecting one’s assets from hyperinflation. (Maybe we should ask people in Argentina what they’ve done for decades to get by.)

Precious metals? Perhaps, as they’re a time-honored means of protecting wealth but can you safely and reliably store $500K, say, worth of one ounce gold coins? Will the government ban the holding of gold bullion again as FDR did in the 1930s? If you own gold, the government could order it turned in and issue (worthless) bonds to you instead. It’s been done in other countries and don’t say it can’t happen in the US. There have already been academic studies advocating the seizure of 401(k) assets by the US government followed by the issuance of an ‘annuity’ backed by government bonds. Again, an enormous wildcard.

The stock market seems to be in a bubble caused by financial pumping by the Fed and the incredible amount of (borrowed) money being printed these days. I think it’s a house of cards at this point just waiting to crash. It all seems unsustainable to me. I’m looking to get out of stocks and into cash soon so as not to get totally killed in a crash. I’m concerned about protecting principal, not missing out on ‘gains.’ (Would have to think about what to do soon after a crash, though, as inflation will wipe out the value of that cash.) I got out of stocks in August 2008 and avoided the worst of the market crash that Fall. With all that’s going on now, I smell a similar rat. (Full disclosure: my wife is a Wall St person that handles very large accounts and she thinks I’m full of it on this).

What one should do at 22 is vastly different than what one should do at 52 or even 62 where I am. My wife and I have investment accounts for our 18 and 19 year old sons and they’re in stocks because they have decades to recoup losses while you and I do not. We’ve told them to invest modestly month after month, spend within your means, let compounding do the work, and you’ll be OK in your 50s and 60s. No, you don’t need a $70K pickup truck, etc.

The bottom line is if I had one place to park cash right now it might be real estate but only if it was somewhere I really wanted to be, and it wouldn’t be a rental. Deep down? I’d like to convert my US dollar assets into Swiss francs. Sober, safe, and not about to hyperinflate.
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