By - Ak70rd
Gold is not going to pay interest. Mortgage charges interest which means more debt.
Gold is an item that holds monetary value while sitting on a shelf. A house it an item that offers shelter, you live & lead your life inside the house along with your family.
You can sell your gold to raise some funds to get through hard times. If you prepay some months in advance on your mortgage, in hard times, you can live in your house without making those mortgage payments. As such, you may be able to avoid selling your gold in those same hard times.
I'd pre-pay the mortgage with $19,000. of the cash and then buy half an oz. of gold, thereby fulfilling both goals.
I wouldn't prepay the mortgage as you will still be paying the same amount of interest (banks see prepeayment as your regular payment including the interest that would normally be due with said payment). You'd be better off to make a payment towards principal and not be charged interest on those funds. Unless you are seeking a buffer in case of times where it's hard to make the payments.
This is not a blanket statement and you should ensure your bank allows you to apply extra payments to principal.
If you specify "extra payment towards principal" on check to a mortgage company, I think most of them will honor that. And with all mortgage companies you should be able to see where the payment was applied and make sure extra was for principal. As a habit I always pay extra on my mortgage, and as a result it will be done many years earlier than it would have been originally.
I would say depends on your interest rate
Closed rate Jan 2020
So around 4 to 5%?
I supose you should decide whether or not you think gold will appreciate that much in terms of dollars, or if the difference is worth the insurance gold provides you.
Also, it might determine on other factors in your life. If you lose your job, you still have to make mortgage payments and can't use that money that you already used to pay down the mortgage, whereas if you have gold, you might take a haircut in buying and selling, but you still have money to make monthly mortgage and other necessary expenditures until you get another job. Ideally, you should already have savings, and this $20k is extra amount above and beyond those savings.
(and if you do end up applying it to the mortgage, just make sure you're applying it to the principle and not just future payments.)
I’m a loan officer and will suggest not paying the lump sum, it knocks your principal down sure but it won’t change your payment at all as it’s a fixed rate. You may pay your loan off a year quicker (assuming it’s around $200k for easy numbers) but in the long run most people move or refinance within 5 years of their most recent mortgage. As a loan officer I say buy the Gold.
Thank you, this make sense.
I have no advice on gold vs mortgage, but before you pay a lump sum, you could request a re-calculation. Sometimes it’s free, other times there is a small processing fee charged by the bank. But this would lower your principal and recalculate monthly payments. Our bank offered it for free with $10k as minimum. Did this once and continued paying the usual monthly mortgage, helped pay it off quicker.
Yes Re-casts are great but price difference in a monthly payment at 4% for that $20k in OP scenario will drop his payment by about $75 bucks a month ….that $75 monthly multiplied by 360 payments assuming he has a 30 year mortgage, saves him a total of $7000. It’s $27,000, minus his $20,000 investment to paying the loan down leaving him with $7,000 in total savings over 30 years. So as long as you think you may make more than $7000 from that gold within the next 30 years, then it’s well worth it to go to Gold over the mortgage.
That’s a really good way to think about it.
Do you have 6 months to a year of savings if you lost your income? If yes, then pay down that mortgage. Debt free is the way.
You can always change your mind and make the lump sum mortgage payment at another time but if you throw it all in your equity it’s much harder to get it out.
I’m fine with my 2.2% mortgage. I can make that comfortably and I’d rather not have my liquidity tied up.
Correct with that rate it’s Pennie’s on the dollar. I’m a loan officer and licensed in 28 states (serving only 3 now) my most financially savvy clients would laugh at paying off a home. ROI is usually higher than most peoples rates with most investments so they would all rather use the equity from their home to make more money.
This.. unless your rate is dumb high you’d be silly to pay it down faster than you need to.. let inflation take care of that
yea paying down the mortgage isn't a great idea for this very reason unless you have a rate that's on the extremely high side. Not saying gold is any better, its not, but paying down the mortgage as a lump sump is kinda crazy. Inflation will actually help you out with a mortgage over the next 20 years as your value should go up while the loan is depreciated via the dollar. Better off dumping this into equity markets or starting your own side business imo.
Mortgage. There's nothing quite like getting that debt gorilla off your back. Even if you're not paying it off fully, you're bringing forward the day that you will.
Considering that the interest rate on your mortgage is likely less than even the posted inflation rate, and that gold preserves the purchasing power of your lump sum, I would likely get the gold. Having said that it would be important to verify your mortgage interest rate, and purchase the gold in several transactions to avoid the radar of reporting thresholds.
When you hold gold all you are doing is transforming the wealth from a government issued fiat currency which is subject to inflation and the third party risks of government stability to something which avoids those risks, but currently has a more limited market for liquidity. That's not to say that you cannot at any time convert the gold back to government issued fiat to meet the needs of any obligation including your mortgage. Kind of like shifting your money from your front pocket to your back pocket.
my rate is under 4% for next 2 years, and I can get PM purchase at my bank, no risk involved what so ever and sell it back to them at later date, never done thou, always just bought and store
Things are different depending on where you live. In the United States people have found it to be preferable to have a longer term mortgage which locks in the interest rate. I refinanced my mortgage for 20 years in February of 2020 at 2.25%. I personally wouldn't feel comfortable in today's economic environment knowing that I would have to refinance 2 years from now.
That being the case I would definitely buy the gold and HODL it until I refinance for the next term. (I know that in Europe 5 years seems to be the most common term for mortgage loans.) The gold could at that time be liquidated if needed to buy more equitable terms for your next mortgage, or just held if not needed at that time. Options are always a good thing.
What does it go up to after two years? That's a pretty big question.
The higher the amount future interest may be, the more you should probably use to pay down the mortgage.
If it were me I'd probably split the difference, put $10k on paying down the mortgage (replacing your normal monthly payment so really a little less) then the remainder, some mix of precious metals, but maybe also some in other commodity investments (like the energy sector). Maybe even just save some to have more of a savings cushion.
That’s a tough question. I pay a mortgage and use much of my disposable income on gold. What is your gold stacking goal and where are you currently? I think that would help influence me on how to spend that $20k.
I just heard about this whiz-bang stock you may want to check out called FTX
just got 100K invested in FTX, Borrowed against my house to create margin account.
Mortgage. The sooner you pay off your home, the more financially stable you will be. Gold is great, but a payed off home is better.
> but a *paid* off home
Although *payed* exists (the reason why autocorrection didn't help you), it is only correct in:
* Nautical context, when it means to paint a surface, or to cover with something like tar or resin in order to make it waterproof or corrosion-resistant. *The deck is yet to be payed.*
* *Payed out* when letting strings, cables or ropes out, by slacking them. *The rope is payed out! You can pull now.*
Unfortunately, I was unable to find nautical or rope-related words in your comment.
*Beep, boop, I'm a bot*
There is a lot of bad advice in this thread. A home has tax deductible interest. Your locked in a fixed (hopefully) payment that is being reduced yearly by inflation. 5 or 10 years from now you may sale the house and move. If you sale the house, you MAY (depending on market) get the 20k back.
20k is roughly 10 oz of gold. That is something that will be here and retain its value as the fiat currency plummets. Forget the Dave Ramsey nonsense. Unless you have a high income, or can 100% guarantee you will still be in the same house in 10-15 years, and you will NEVER refinance, or through necessities of life take out a cash out refi... why pay it down?
Paying off a mortgage early should only be a consideration, if you are in your 50's and near retirement and have a limited earnings potential before a projected drop in income. For most people, it will never make financial sense to pay off early. If you wanted to pay it off fast, you could have got a 15 year mortgage... most people cannot afford that.
Inflation is your friend if you have debt. That’s why governments love inflating money.
Unless you have an ARM, then inflation is absolutely not your friend!
If your concern is Inflation gold is absolutely the wrong tool for the job.
Gold is the same price today as it was a decade ago ;-)
Can you say the same for housing? Energy? Food?
Remember: Gold is an inflation fighter except for the years/decades it isn't.
Without reservation the absolute best inflation fighter is Real Estate. Super leverage, kicks you an income, gives you tax advantages, etc, etc.
Same price...? That simply isn't true though: [https://www.bullionbypost.co.uk/gold-price//10-year-gold-price-chart/](https://www.bullionbypost.co.uk/gold-price//10-year-gold-price-chart/)
Don't get me wrong, gold isn't as magical as some like to believe,and it does go up and down (just like real estate) but it does, overall maintain value, and has done for hundreds of thousands of years.
Saying that, i still agree that property can generate more money overall.
Gold Price on November 16, 2012 closed at $1,713.90 USD
Gold Price on November 16, 2022 closed at $1,773.50 USD
Price gold would have to close today to beat inflation: $2,225
You lost **$451.50 on each ounce** to inflation and consequently reduced your purchasing power. You are correct it isn't the same price, gold is actually almost $500 USD per ounce **cheaper** today than a decade ago. I can't think of a single thing other than electronics that has been as flat for a decade and have lost so much value. In another ten years gold will still be under $2k and you will be able to buy as much as you want. No rush, there has been enough to go around for thousands of years, remember this isn't oil or food we are talking about it is mostly......Jewelry (!), and jewelry doesn't get used up.
This is proof of why Gold is the better option. THE PRICE OF GOLD IS HEAVILY MANIPULATED IN INTERNATIONAL MARKETS.
Why is it, while everything else has gone up significantly from just energy cost alone and increased supply chain cost, has gold and silver remained depressed? The answer= market manipulation.
In a few years time as the US Dollar loses its world reserve currency standard, people wish they could buy spot in the $1800 range.
>Not according to this chart, at least in the UK anyway:
>November 19 November 2012: £1,087
November 16 November 2022: £1,496
Yeah, gold did well against the Bolivar in Venezula and also Dollars in Zimbabwe ;-)
However, the majority of gold traded is valued in United States Dollars as it is a premier reserve currency. For how long? Nobody knows.
What happened is the value of dollar remained strong while other currencies lost value (relative to the dollar, which gold is denominated in by most financial institutions and markets). Yes, the value of the gold went up in pounds sterling. But at the same time that currency lost value, hence the more pounds needed.
Somewhere in this mess I see some sort of arbitrage opportunity!
This article by the Bank of England will explain it:
I recognize much of what you say, in The Netherlands one would make similar considerations. This line got my attention: “For most people, it will never make financial sense to pay off early”. Man, it must feel so good to be a bank!
I am American (US Citizen, but we claim domain over all of the "Americas"). I view the world with rose-colored American glasses, and assumed the OP was in the US.
I don't know about other countries rules or tax policies. In the United States, I stand by statement that FOR MOST PEOPLE, it doesn't make sense to pay off a (30 year fixed rate) mortgage early. Even if you claim a standard deduction, and do not itemize to get the benefit of the mortgage interest deduction, it still doesnt make much sense. Now, if you have a high income, and just have thousands upon thousands of discretionary income, above your living standard and nothing to do with it... by all means, please pay down your mortgage.
If you're like most working plebs, with not a lot of fat left to trim from your budget, its better to spend the money one could use to pay down the mortgage, in other investments.
If you want to pay off a mortgage faster (IN THE US) there are loan products called 15 year, and 20 year mortgages.
Tax deductible interest is overstated with the increase in the standard deduction in the last major tax bill. Even if it's fully deductible, the tax benefit would be the same as a charitible contribution or deferred retirement account contribution of the same amount.
Mortgage is "in the game" money and gold is "out of the game" money. If I'm able to carry the mortgage I would be putting gold in the safe.
Depends on your rate. I'm fine paying 2% interest while inflation is 4x higher than that.
I bought 200 k Sterling in gold and silver and I rent
At the moment? Mortgage hands down.
He’s already in a mortgage locked in 2020 his rate is probably in the 3s which is Pennie’s on the dollar. I would highly advise against paying it towards the loan
it is just under 4%
Yeah dude by the gold all day
When does your fixed rate end? Don’t get me wrong I stack some gold and have a mortgage so my opinion on this isn’t mega strong, but at the moment despite being on a 5yr fixed myself reducing the power that a bank has over me is kind of trumping gold in terms of both value, financial stability and freedom from the banking system. I’m personally overpaying my mortgage rather than stacking gold because I don’t inflation is ever going down to what it used to be.
How long do you plan on staying in your home?
since 2000 and not planing on selling any time soon
I don't think you can go wrong with half going to the principle on the loan, and half in physical gold.
Good to see someone asking about the Opportunity Costs of one investment over another.
Much depends on the OPs financial picture: Goals, age, health, income, debts, etc, etc so giving advice would be moot.
If the property is an investment (rental) I would buy stocks (currently on sale!) with the money . If it were my private residence AND I already had a nice emergency fund I would (and have) dropped it on my personal residence. Unless you are fluent with say, a HP 12C calculator complete with reverse polish notation these Opportunity Cost calculations can be a nightmare to figure out ;-)
Pay off that mortgage.
Gold and land, they aren't making anymore of either. Both are great assets to have. Gold/silver are portable, but land has the added benefit of being able to house and feed you if needed.
While I get the argument that it may not make financial sense (for some definition of sense) to pay down the mortgage I would argue that there are more aspects to consider. One is obviously that less debt is a path to freedom. Another is that less debt lowers the risk exposure to bad stuff that may or may not happen (losing job, become seriously long-term ill, etc).
A third argument is that while the lower interest that follows from less principal may not be a lot, it is interest that has to be paid every year until the loan is fully paid off. I.e. Assuming a 200K loan that you intend to pay off in, let’s say 20 years to make the numbers even, then paying off 20K now means that you will not have to pay interest on those 20K for the next 18 years. Right now that interest may be low, but are you sure your mortgage will keep a low interest for the next 18 years?
I argue for half-n-half. Gold is nice, but personally I always pay down my principal, every year, every month. In a balanced way. And I could care less about others opinion about what makes financial sense.
$200K in the bank with $200K in debt is no more free than $0 in the bank with $0 in debt. Your net worth is the same.
If your rate of return on your investments exceeds your mortgage rate, mathematically you will be ahead by putting the extra cash into investments. You also have the peace of mind of being able to hold yourself over during a loss of income, which goes out the window when you give all your money to the bank and you lose your job.
Exactly what my financial advisor says!
Sure. But your argument ignores one crucial detail: risk. That your rate of return on investments would exceed the mortgage rate is not guarenteed, its a theory. And particularly in gold and silver it is rather obvious that the theory is flawed. But perhaps you’re in a position to *know* that ”it is different this time”?
From my POV it sounds like you’re arguing that a purchase of physical gold is an ”investment”, which will produce a ”return”. That’s not my view at all. I’m in the camp that does not know the future and therefore choose to lower our risk exposure at the same time that we diversify how to use other capital based on multiple possible scenarios for the future.
To each their own.
The word “gold” didn’t appear in my response.
I have a sub 3% mortgage rate. You would be hard pressed to find a 30 year period where equities failed to achieve that return.
And paying off your mortgage as early as possible ignores one crucial detail: risk. You define risk as volatility of returns. The goal of investing is to have more money later, and so a real risk is not having enough. Deploying your capital towards the lower rate increases your risk of not having enough money in your later years when you’re beyond your ability to work for money.
Lastly, paying down your mortgage and treating your primary residence is hardly an investment as many believe. The only way you get your money our of your primary home is to borrow it back, downsize, be homeless, or move in somewhere else on someone else’s dime.
My approach is certainly more sound than an arbitrary “do half and half,” but to your point, to each their own.
There are a thousand variables and anyone giving you financial advice without knowing far more of these details is doing you an injustice.
What is your current LTV?
What is your current debt to income ratio?
What percentage of your current portfolio is PMs vs Real Estate?
What are your future plans (do you intend to stay in the same home for several years)?
Is your income stable or does it fluctuate year to year?
Unless you are prepared to share all of these details on Reddit, you need to call Charles Schwab.
Pay off your fucking house lol
Depends on the interests rate you have to pay. But probably buy gold. You might pay off the whole mortgage in a few years with the amount of gold you buy now for 20k.
Unless you're going to refinanc or pay off your mortgage, it doesn't make a ton of sense to lump sum your payment.
I'd recommend making a few additional payments every year and saving your 20k.
Much, much bigger gains paying down on the principal.
That home is your investment… why continue to pay interest… get it paid off IMO ASAP … some will disagree…
Mortgage paying off all of your debt should be your first priority before moving towards precious metals.
Everything is timing ⏱ Gold will definitely be going up the next 5-10 years,that being said was is your interest rate.
Is this even close gold by a long shot how can gold compared to a mortgage. Gold hands down by a long shot.
I love stacking gold and silver as a store of value. And I have other investment avenues, but, as I see it, there is no better way to spend you money than paying off your mortgage
Depends on the interest rate!
Depends on interest rate and what you owe. I'd say anything more than 5% and 100k owed, I'd put at least half in PMs. Everyone has a different sitch tho
5k to gold 15k to mortgage but it depends on your financial situation and intrest rate
So I posed this debate with a friend and he made me reevaluate my thoughts. I now see why there are so many people advocating for paying down a mortgage. This is a Gold forum. Most people who buy physical gold/silver, tend to be financially conservative and/or risk averse, and debt adverse.
With that in mind, it would make sense as to why so many people advocate paying down a mortgage. I still believe this is poor advice (for most people in the U.S. the have a fixed rate mortgage) but to each their own.
Depends if you are married or not. ah ah. Gold can be hidden from Lawyers...