What happens to house loans....?

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I am in the market of buying a house right now. What happens if I do and then suddenly inflation hits. Will I have to just pay the physical amount of say $100,000 or do I have to pay $100,000 plus let's say 20% inflation. $120,000.

I hope I made sense. Will I have to pay by todays dollars or can they up the loan amount to cover THEIR cost of inflation?

Thanks for the help...

-- Scholty (scholty@waymark.net), September 21, 1998


You'll pay whatever amount is on the contract that you signed.

-- Amy Leone (aleone@amp.com), September 21, 1998.

Lucky for you if your home inflates in price. If you paid $100,000 for it today, and next week it is worth $120,000, you just made $20,000. However, if you paid $100,000 today for your house and next week the real estate market takes a dive and your home is worth only $80,000, your stuck paying for a loan of $100,000. You will have to make up the difference to pay the loan off if you were to sell it. Not a good situation to be in.

-- Bardou (bardou@baloney.com), September 21, 1998.

The real pessimists would tell you NOT to buy a house now unless its a hunting camp somewhere. If this Y2K situation gets WAY out of hand, the house you buy today for $100,000 will unsellable at $50,000 in 15 months. Deflation is more likely our immediate future than inflation.

-- R. D..Herring (drherr@erols.com), September 21, 1998.

If you decide to purchase a home, put the absolute minimum possible down payment. If homes deflate to half their value, there will be a nationwide collapse of banks and mortgage companies. If that's the case, then I foresee renegotiating my existing loan with my mortgage lender (or whoever has taken over the mortgage note) to it's now true value. I have seen $200,000 homes in our former town deflate as much as $35,000. Many homes were sold as a "short sale," and many homeowners just walked away from them. In some areas such as Silicon Valley, CA, and some areas of the Bay Area are hyperinflated.

-- Bardou (bardou@baloney.com), September 21, 1998.

I'd walk away from buying a house at this time. We are putting off major financial decisions for the next two years, other than midnight gardening and moving some stocks to cash! Good luck Scholty!

-- Dave (dave22@concentric.net), September 21, 1998.


Consider the other side of your recommendation: if by buying a house (now, rather than later):

1) Interest rates will never be lower: this will allow getting a 15 year rather than 30 year loan = 60-85,000 in les interest payments, at about only a $50.00/month increase in payment.

2) Lower interst rates (locked in now) rather than later at ?.?% or ??.?% (you pick the increase) will save another 25,000 to 50,000 in interest.

3) Buying now, in a place of their own choosing, whle looking at Y2K in mind (available water, sunshine, solar panel siting, trees (summer cooling), etc.) let's them prepare for what ever level of risk they choose. Also, its their's to modify or upgrade -- you can't go making improvements to a rental place, and I would never recommend anyone stay in a crowded apratment complexe packed with thousands of (potentially) "hungry" associates without power, telephone, water, or sewage.

My humble opinion: buy now, and plan on putting payments in the registered US snail mail: if the government doesn't deliver them, fixing th ecredit report is easy if you can prove you mailed the check. Besides, if they screw up the payments you mailed, they will have screwed up thousands of others.

The difference is: you have proof, they don't. And if th e check is never cashed, .....

-- Robert A. Cook, P.E. (Kennesaw, GA) (cook.r@csaatl.com), September 21, 1998.

So solly challee

Me most so humble to disaglee. In deflation, is most wise to buy afta plice clash, then honorable one is not to lose too much money, when plices fall. Confucious say "Buy low, sell high".

Plices high now. Always fall in deplession.

-- Uncle Deedah (oncebitten@twiceshy.com), September 21, 1998.

Ah so, kind sire, I beg your humble forgiveness to differ in small matters. Let us continue this volley, as I bounce the birdy (the frog legs?) to your side of the net in response.

Please note your assumption that the buyer buying low has already bought, or has an option of buying now at a higher price or at some future time at a lower price. 'Tis my assumption, given that the depressed future prices will occur, but given too that preparations to take advantage of those prices would require the presence of secure shelter, and time available to make such preparations to the homeowners.

Thus, my conclusion that, if "they" (and granting that "their" circumstances are unknown to this reader) feel threatened in their present location, they should purchase (at a higher price) now to enjoy the remainingg time to make whatever preparations are felt important. For example, one family is moving to HI and is taking very close consideration to Y2K in their purchase in that state. Another was discussing moving "back to the farm" for the same reason.

On the other hand, if the Scholty family are considering moving strictly for comfort or to get another house or such less critical reason than safety (ie getting out of a mid-city apartment building), then they should protect their wealth such that is is available to spend in the expected depression: forexample, staying invested instocks is not recommended if one is planning for depressions. This would take advantage of lower house prices.

-- Robert A. Cook, P.E. (Kennesaw, GA) (cook.r@csaatl.com), September 21, 1998.

This also raises another interesting real estate-related question... what will happen to the rental market?

Will people who rent vs. buy be in a better position later because it will be a Buyer's Market post-Y2K?

-- Sara Nealy (keithn@ptd.net), September 22, 1998.

If honolable one buy falm fol sulvivil, is OK pay high plice. If buy subulban leal estate, evely day type house, buy afta plice dlop.

-- Uncle Deedah (oncebitten@twiceshy.com), September 22, 1998.

Uncle Deedah, you've been eating too much Chinese food! :-)

-- Gayla Dunbar (privacy@please.com), September 23, 1998.

My husband works for one of the nations largest banks and for years helped run their check clearing, if the money fails to run, checks and electronic transfers etc. for 1 day it takes thousands and thousands of person hours to reconstruct the books, banks must balance each work day, and billions and billions passed through his facility each night, one night down and it is difficult, 2 down has never happened in history, 3 down and there is going to be a real problen 4 down.....you get the picture if the federal government doesn't do something very radical, like gov bank takeover-hard to swallow by the american people-then kids we are all going to stay right where we are for a very long time my husbands bank has 132 financial instruments with 132 different interest rates and systems, there are about 7000 banks/credit unions in the U.S. not 1 is compliant, including Bank of Boston, although they are close, and even if they were the Fed is not, the final clearing with the fed is sort of a show down between banks to move the piles of money, if I write a check to Macy's it is cashed at a bank in Arizona of Ohio somewhere, we live in California, that check goes on quite a little journey before it gets back to my bank, both physically and electronically there are 4 banks in Canada, there are 7000 here, can you see what I mean, and if we are so are the worlds's banks we are toast

-- julienne (bootman@value.net), September 23, 1998.

Slow down Julienne, you need a couple periods in there, so I'll loan you a few.....................................8<)

The default text editor here seems to prefer 2 at the end of a paragraph. If you only use one between sentences or in a list, it "mushes" the phrases together.

-- Robert A. Cook, P.E. (Kennesaw, GA) (cook.r@csaatl.com), September 23, 1998.

And if you enclose "carraige return" as "cr" between two "less than" or "greater than" brackets < or >, it doesn't display cr at all.

-- Robert A. Cook, P.E. (Kennesaw, GA) (cook.r@csaatl.com), September 23, 1998.

sorry about the form,

the issue of the banks is very much one with which I have some information, even so it is very hard for me to extrapolate what will happen, will we go to gold? we we become a barter economy? will it just all sort of happen in slow motion? I think all of it will happen, but my little brain cannot take it all in,

it is like some sort of Outer Limits or Twilight Zone test, set someone up with a paradym for 50 years, my age, them change all the rules, watch to see what happens, is God just having us all off? I have no context for all these interdependent systems failures, the chaos theory sets in real quick,

to get back to the thread, I am not the least bit worried about loans, just who do you think is going to collect without mail, gasoline, telephone, banks or electricity, forclosure takes people well fed and watered to do wll kinds of things, do you really think they are going to get the police to put you out with all the other problems the police are going to have? my final advice: be in a place that will feed you independently, that has it's own water and that you can love a long time, then pray

-- julienne (bootman@value.net), September 23, 1998.

julienne's description of the impossibility of manual-override in banking is pretty close to proof of the coming crash. Show her post to any doubting thomases and thomasinas you might care to enlighten.

-- sothisishowitallends,ohwell. (frodo@hobbiton.com), September 23, 1998.

Hey, julienne, great to hear you speak again...even without the punctuation. Now, I have a little question about buying a house. My spouse and I have been preparing for y2k for about one year and think we have a farm sort of ready. (Is anyone really ready???) Anyway, I am having trouble getting used to the 35 min commute to work and frankly I miss friends in the small town we left. Therefore, we are considering using the VA loan to buy a "regular house: in a quiet neighborhood near a lake, only 10 min from work. Are we crazy? I keep going back and forth on this. We could get in for less than one thousand $$$, but would then have to keep up another place. Wish I loved the country more!!!! Any ideas about the mortgage and the plan? Take care, bem

-- ben (benalurker@usa.net), September 23, 1998.

Look into the Homestead Exemption. This protects you and yours in the event that you cannot continue to make mortgage payments. It is my understanding that you can exempt one and only home that cannot be foreclosed upon in the event of bankruptcy, which is where you could go well before you were kicked out of the house. Of course, the home you decide to "exempt" should be a reasonable one. I'm not sure if 20 room palatial mansions would be eligible, but that will definitely not affect me.

-- bhayes (bkhayes@intellex.com), September 24, 1998.

Heck, I'd like a 35 minute commute any time.

I'm 14 miles from work, it used to take 20 minutes, even during rush hour.

Now, if I leave the house between 6:30 am and 8:50 am, it takes between 50 minutes to 1:15 to go the same distance. If I leave at 6:10, I'll be at work at 6:30.

But traffic backs up so fast (and moves so slow now) that if I leave at 6:35, I'll get there at 7:30.

Consider commute times, not distances. Also, wouldn't having a second house mean twice the cleaning, washing, laundry, etc? (Unless the "other" household member does those things, leaving you free to enjoy fishing down at the lake. 8<))

-- Robert A. Cook, P.E. (Kennesaw, GA) (cook.r@csaatl.com), September 24, 1998.

This question's plaguing me, too: I bought a house two months ago , and at closing all the paperwork seemed so funny, knowing lots of it would disappear or otherwise be immaterial in 18 months.

What I want to know is: the only way to lose a truck or house or or boat is through physical reposession, or the sheriff coming to haul you off, so how long could one not make payments? Repossession assumes healthy markets, demand for the foreclosed items, and people showing up to the job to issue foreclosure orders, and people driving out to get the items.

I can't imagine a sheriff physically removing anybody from their house during the chaos, unless he knew somebody else he'd like to put into the house......

Renters of houses I think should beware: people will likely be putting their relatives and friends or even themselves there. It may turn out that a 2000-proof house will be pounced on, whether you're late on your mortgage or not.

-- lisa (ex-amp@gone.com), September 24, 1998.

Please give more information about this "homestead exemption". Can you provide some URLs or sources for info about this? Thanks.

-- Bobbi (volfnat@northweb.com), September 28, 1998.

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