Should we mortgage our first home or pay cash, before y2k? After y2k?greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
We are planning to move within the next six months to a house that is safer and better suited for our family in light of the coming y2k crisis. We have recently come into some money, right on time I might add, and have a property in mind. But we are not very wise as far as investing and making the most of our money. Also we have no idea what the market and interest rates are likely to look like after the year 2000. We are wondering whether we should: 1. Obtain a mortgage loan now because the interest rates are low, and invest our cash in safe places now. 2. Pay cash for the house now and wait till after y2k ( should interest rates be lower) to mortgage the house and invest the money. 3. Pay cash for the house and own it outright.
We know that the borrower is servant to the lender, and considering the times we are living in, we wonder if we should try to live debt free. We want to be good stewards of the money G-D has blessed us with. Any suggestions would be greatly appreciated.
If we buy the house for cash, we would have approximately 75 to 100,000.00 dollars left after the purchase. What should we do?
-- Jeri Saunders (firstname.lastname@example.org), December 12, 1998
As a Christian myself, I would look to the Old Testament verses which tell us not to be debtors.
However, I have not lived this way myself, so I cannot judge anyone's lifestyle.
We have a large mortgage and are seriously considering a new minivan (which will be yet another loan, previously we were able to pay off both cars and generally stay ahead of short term credit card debt).
For the non-Christian, I could definitely believe scenarios where people believing TEOTWAWKI that you should load up on unsecured debt, knowing that a simple bankruptcy judgement can wipe it all out.
However, that goes against the grain of any Christian teaching I can think of.
I would say if you can pay off your house and still have 75 to 100K in cash, then you're in GREAT shape!
I would say take the balance, prepare your family. Then remember to prepare your church. Because the church is always called upon in times of crisis (and all times) to food the hungry, clothe the naked, visit prisoners, and provide shelter to the homeless. Something too many churches fail to do.
-- Glen Austin (email@example.com), December 13, 1998.
Stop! with the Christian and non-Christian bullshit Glen. What economics that are happening now and then applies to everyone. What? You think that just because you wear a cross that God has special plans laid out for you? BULL SHIT! A whole lot of religious and nonreligious people are going to suffer the consequences of whatever Y2K brings their way. Jeri: No one can advise you to pay cash or not pay cash for your real estate. Every persons circumstance is different. I have always read from the "experts" to never be real estate rich and no pot to piss in, so take your pick. May I quote from the Bible: "What does it profit a man to gain the whole world be lose his very sole?" Since you are flaunting your wealth, I would say give all your money to the poor people who have not prepared for Y2K, and you shall be rewarded with a star in your crown.
-- lurkerlou (firstname.lastname@example.org), December 13, 1998.
But Christians and non-Christians are called to different answers.
If you only worship yourself (the ultimate idol), then the answer, if you clearly believe that there will be an absence of government in the future, would be to load up on everything possible to contribute to your survival and future prosperity. And carrying that to the logical extreme. I'm going to eat well, even if I have to kill 1000 people to do it. (Or enslave them, probably more productive.)
However, if you believe in God, then you're bound by a moral code. This moral code is laid out in the Old and New Testaments of the Bible and there are clear rules for behavior.
A point that was made in a previous post was that 7 of the 10 commandments are present in every other religion in the world. Don't kill, don't steal, don't lie, don't commit adultery, don't be jealous, obey your parents, and take time out to worship.
By the way, if everyone could obey the 10 commandments (even the 7 that are common), then Y2K wouldn't be a problem, now would it?
You may feel that Christians are hypocrites and you may even hate us enough to persecute us, but Jesus said 2000 years ago, "Love your enemies, pray for those who persecute you".
I'm not perfect, maybe that's why I'm a Christian.
-- Glen Austin (email@example.com), December 13, 1998.
Everybody's got to make their own moral decisions, but as a practical matter, paying cash might be a hedge against a Great Depression but not TEOTWAWKI scenario. When you've got that much to spare, I don't see a downside. You can spend the rest on tons of grain and so on, feed anybody hungry who comes by, and you've got your equity as a nice secure investment.
-- Shimrod (firstname.lastname@example.org), December 13, 1998.
If there's a depression, your equity will become depressed too. How will you get your equity out if we are in a financial crisis? If you buy your house for $100,000 and a year later it is deflated to $50,000, you will have lost $50,000. I'm thinking about refinancing and taking my equity out now before I lose it. The only pro I see to owning your home outright is not having to make a mortgage payment and it will leverage you to purchase more property for income. Also, if nothing happens with Y2K you can always pay your mortgage off earlier. I think you should hold onto as much cash as possible. JHMO
-- bardou (email@example.com), December 13, 1998.
Jeri/Glen: We are called to be good stewards. Today, there are people (perhaps foolishly) willing to exchange cash today for future electronic principal and interest. IF we believe that electronic assets MAY become worthless, then isn't only prudent to borrow now (within our anticipated ability to repay as agreed)? Similarly, IF we believe our stock holdings will collapse, don't we have a stewardship obligation to sell it now (by definition to someone foolish enough to buy it)? No easy answers. I'm interested in your thoughts from a Christian perspective.
-- Dave (firstname.lastname@example.org), December 13, 1998.
I hate to get in on a christian/non-christian debate, but survival and prosperity would seem to be the logical thing God would want us to do, within reasonable boundaries and by reasonable means. When the banks are milking us at this very moment, why should we be the good stewards and give them all the cash? Wouldn't it be more moral to take the loan, prepare your family as best you can and then use the left overs to prepare for your extended family/friends in need if SHTF?
As an aside, my bank was just bought out by First Union. I now have to pay $.30 for every check I write, $1. for every ATM withdrawal from Wawa convenience store which already pays the bank on my behalf, and up to $2 at other ATM's. Plus monthly service fees. I guess someone has to pay their Y2K fixit bill. I'm shopping around for another bank.
-- Chris (email@example.com), December 13, 1998.
We are in the same situation as you right now, except we dont have quite as much cash.
We're going to pay off as much of the house as possible when we move in, keeping the mortgage as low as possible, and yet some money left over for post y2k 'expenses'.
The thing to remember is that things like cash, or gold, may not have that much value in a worst case scenario. But - things like grains, beans, wood, diesel fuel, etc - could have enormous value. Add to that list the whole gammut of other survival-related items ... and THAT'S what any equity you now have should be converted to.
I hope that helps; that's the route we're taking.
-- Louis Navarro (firstname.lastname@example.org), December 13, 1998.
Jeri, The best investment you can make for yourself and family is to own your home free and clear. Disregard the focus on value. A home is not an investment like a car or stocks where the concern is $$$. A home is security and a refuge. God has blessed you with the ability to establish a firm foundation (paid off free and clear) and extra to provide for the needs of your family and if need be friends and others in need. What a wonderful witness! If you are out of debt then all the income that you would have sent to the bank to support them (interest) is money that you can use to further God's work. As you know in the Bible God says to test him in this area - "Bring the whole tithe into the storehouse, that there may be food in my house. Test me in this, says the Lord Almighty, and see if I will not throw open the floodgates of heaven and pour out so much blessing that you will not have room enough for it." Malachi 3:10 As you probably know, God's blessings come in many forms not just $$$. But for certain you will know the blessings when God sends them. God tells us not to be foolish and he also tells us how important it is to provide for our families. Read how Joseph handled the times of famine, he used a great deal of wisdom in providing for his people and others who were in need. Pray for wisdom. Note alot of experts giving advise do not have biblical basis. You can also call Larry Burkett's Christian Financial Concepts Ministry (cfcministry.org)1- 800-722-1976 and they will give you solid biblical advice. Diana
-- Diana (email@example.com), December 13, 1998.
I know there are others besides myself who see the second millenium as having changes greater and different than those most see coming. One of the greatest I see is the 'heat death' of the Christian religon. The church broke apart 400 years ago, and has been fragmenting further ever since. The day is rapidly coming when the Christian religon will be supplanted by something else - and I don't know what that will be. But a 'house divided cannot stand', and the formal church begun in 398 AD is rapidly fading away.
-- Paul Davis (firstname.lastname@example.org), December 13, 1998.
Well, I will point out that "the formal church begun in 398 AD" is not the same thing as the Christian religion described in the New Testament, several hundred years earlier.
-- Shimrod (Shimrod@lycosmail.com), December 13, 1998.
Diana: Would Joseph have advised Pharaoh to payoff the national debt (assuming they had one) before building the additional storehouses for the grain? Wouldn't Joseph have been a good steward if he had chosen to borrow a portion of his future salary to invest in what he knew to be an appreciating commodity (perhaps he did)? I would see this as a demonstration of his faith. Also, in the parable of the talents (Matt 25:7) the servant which doubled his masters property (100% ROA - surely this involved some degree of financial risk) received a "well done!" Not a flame Diana, just another perspective.
-- Dave (email@example.com), December 13, 1998.
The rise of the 'formal church' in the 300s was a guarantee for the first time there would be many 'Christians' in name only.
Before Christianity became the official religion of the Roman Empire, believers dealt with persecution. Starting in the 300s becoming a 'Christian' was a way to get a better job or hold political office.
-- Johannes (firstname.lastname@example.org), December 13, 1998.
The original question asked is one that I have been debating, too.
I still wish I had a reliable crystal ball. Oh, well.
If I had the resources to both pay off the mortgage and store food and heat for a year, I'd pay off. If things get to severe recession, but not complete chaos, our house is one that the banks would love to repo - they'd still get their money out of it, since we owe relatively little; whereas houses mortgaged to the max are not going to be as appealing. Since to pay off our mortgage means going into our retirement money and that means losing 30% (not 10 like in the US), my husband wants more assurance that chaos is certain before doing that. We are looking for a small rural property that we can buy with money that we get either from cashing in retirement funds, or by remortgaging our current residence (which we plan to keep). I'd feel more comfortable going whole hog, but ... keeping the marriage together is important, too. So, I'm stocking up on food , planning for heating measures and hoping that something (the Joanne Effect?) will bring my husband's assessment from a 2-4 to 6-8 (or that he'll decide that 'insurance' is prudent).
-- Tricia the Canuck (email@example.com), December 14, 1998.
If you own your home clear, nobody can legally throw you out of it.
If you don't, they can.
This ought to answer your question. My view is that if you can pay off the debts and have enough left over to prepare, then do. If you can't, then next best thing is to make sure you're well-prepared and able to make repayments for as long as possible even if you wind up without a job.
If TS really hits TF, this doesn't apply. However, there are slightly less dark futures where it applies with redoubled force. Can you rule out the reintroduction of imprisonment for bankrupts, for example? (This was the norm less than 200 years ago. I seem to remember that in Roman times one was sold into slavery).
-- Nigel Arnot (firstname.lastname@example.org), December 14, 1998.
Which and what scenario are we speaking of? If TSHTF no one will be moving anywhere, everyone stays put. If it's a mild recession and you are out of work but some of us still have a job, then sell your house now while you can recoop your potenital losses. Just roll the dice and take a chance.
-- Y2Kbabe (Y2Kbabe@xxx.com), December 15, 1998.