We thought we would do Q&A With The Doc a little different this week, and let SD's readers be the experts and answer this reader question as there is no easy answer and it deserves group think wisdom from SD readers. Mike writes:
Hey Doc,
I've been a follower of the SilverDoctors site for about a year now. I am seeking some advice or just looking to get my thoughts out to some of you guys on here. I wouldn't mind having this question on a public page so I can get a wide range of advice. This is about my parents' home and retirement. Currently we live in a home that has a $100,000 mortgage. They've paid probably well over $150,000 over the life of the house. My parents refinanced the home in the past because of being laid off from work and/or needing to pay for children's medical bills, etc. My dad is 56 and my mom is 55. My dad just lost his job where he made $60,000/year.
I've been trying to convince them that paying into this house is a waste of time and resources. What should they do about this house? They've lived in it for almost 30 years. Too bad I wasn't old enough to be able to give them better advice than taking up an impossible mortgage back then. My dad recently took out $10,000 to pay off the second mortgage on the house and he has about $33,000 in his IRA. I've suggested he take that out and put it into physical gold and silver. Now do you or anybody else have sound advice to do this? Just cash out and buy phyzz? What about the house? I've recommended we stay in as long as possible, save the money, and put it towards more phyzz or something we want - maybe braces for my sister, lol. But in all seriousness, I can't see my parents paying off this house and I can't see my dad maintaining his money in a US dollar denominated IRA. Thoughts and advice would be great. Thanks Doc!
48 comments:
only stop paying if it is a BAC loan, you will get about 10 mnths before forclosure process they are so backed up...has soon as you get a forclosure notice, you will need to file a complaint against them with the judicial court in your town, this will buy you another six months, then follow that up in the same court with an injunction, this will buy you another 6 to 8 months. good luck, if this loan they have is with a local bank...they are smoked.
If you walk away from a loan, don't think that the bank will not come after you...they CAN and they WILL! Also, your credit will be trashed. ALWAYS PAY YOUR BILLS
They have to live somewhere. What is the difference between monthly rental cost verses their monthly mortgage payment?
Let them eat cake!
@ Anon 2:58 If you're upended in some house that you will NEVER pay off, you're better off renting and not worry about property taxes. On the other hand if you fall on hard times and you're broke, a landlord could kick you in 30 days while a mortgage you could squat for 6 months or more waiting for foreclosure.
@ Anon 2:42 If you're broke, your credit is trashed anyway, and a lot of people are in that situation thru no fault of their own. What's the point of trying to save your FICO score at all costs while your children go hungry?
The problem is no one knows when Phyzzz prices will make major spikes upward. Be very careful making life changing bets with your homestead because what happens if you are not correct and silver prices remain flat until 2014?
Now is the time to be smart with your money. Only buy things which will retain value in hyperinflation or in a currency devaluation. Silver is one of those items but then again so is copper, food, cotton, brass,whiskey, etc.
If you're in this dire of straits plus have time to burn then learn about sterling silver pieces and start hitting estate sales looking for bargains on metals. Sure a silver .999 coin is a lot easier to sell than a sterling spoon or roll of copper wire but both are worth money due to their content and both will retain value. There are lots of deals to still be had by the savvy investor which has time to burn.
Dear Mike,
paying on the house is a complex personal decision. you really didn't give enough information.
However, getting out of the IRA is a no brainer and we've had lots of warning. If you choose to stay in that, you deserve to lose it.
Anon 2:42
You are a pussy. Big brother needs people like you to cower and do what they are told.
^^^^ LOL ^^^^
On the first part of your question ... a mortgage is a proper obligation that shouldn't be defaulted on except in the last instance where no other recourse is remotely available. In my own case I suffered through a 14% interest rate for 17 years, facing bancruptcy three times over the course. I struggled through to liquidate the debt three years in advance of the original maturity. It took eating pretzle lunches for many years, but I recognized the magnitude of what is immenantly approaching and decided that I would be better situated on this humble plot, unencumbered by either Law NOR Equity (but that's another, far longer story).
As to the second part of your question ... again I'll resort to example from my own choice. A little longer than a decade ago, I began to sense the demise of the world's currency system and understood that a sufficient 'trigger-event' would implode the entire rotten facade. I wasted no time in closing ALL credit, bank, insurance and retirement accounts. From my point of logic (which you may be familiar with, having read this page for a year), the precipice on which all currency is perched, has always had a crack running through it. As inflation weighs on that needle of support, the demise is simply a foregone thought. Labor stored in, or obligated to these instruments are so much 'zombie' funding. It appears, for all outward signs, to be 'live', but the rot inside is relentless and can crumble to dust in an instant.
Beyond saying what I myself have done, will have to suffice.
Pat Fields
Dear MIke Have your parents thought of selling the home, liquidating the mortgage and renting. If the home is worth more than the mortgage, and it's in their best interest, then sell. They need to be mindful that they have to live somewhere.
A $100,000 mortgage is probably about $500 a month or less. Liquidating the IRA will force a sizeable tax hit since neither parent is more than 59.5 years of age. Sometimes a hardship situation will allow for temporary liquidation of the IRA or the commencement of withdrawals. Loss of job, health reasons etc can be a factor
Does your mom work? If so, how much is the total family income. Does your dad get unemployment compensation? Things may not be as dire as they sound. your folks are not old and things could look up for them Cashing in the IRA would allow you to buy about 1,000 silver rounds at present prices. Buying PMs should be considered as a separate decision from mortgages, taxes and lifetyle if possible. Just be sure they have the money to pay the taxes. A good accountant is going to be very important at this time. If your folks can retain their good FICO and some capital then they are going to be head and shoulders above the average person.
Don't file bankruptcy unless it is a dire situation. FICO scores and a good credit record will be very helpful in the future. Get back to us with the questions and we should be able to give you more advice.
I'm a former banker and have seen lots of situations like this I wish you best of good fortune
Hey guys, thanks for the input. My dad just filed for unemployement comp and should be getting it. We have 5 living with us and my mom does work a part-time job, so not a lot of money there. But my older brother and I can throw money their way, but again no big amounts. We've pushed back our mortgage payments for the next couple months to give us an idea of what we want to do for our next step. I've been doing the rental searches since I figured we might as well look around in case we decide to go that route. And I know the banks could surely come after my paretns for the mortgage but I think there comes a point in time when the common man has to stand up to these fuckers and just stop paying them and protect what little one has left. Ah, have I answered any of your questions? Hmm...parents have excellent credit...I believe they've been paying close to $1,000/month on the mortgage for about the past three years so obviously losing a job is a big hit at the moment. Let's see...my dad's already been convinced that holding phyz is a solid idea, so he's moving in the right direction (as he sees I've been doing it for some time now and it's not something crazy or difficult).
Mike
$1,000 a month. That sounds like a very high mortgage payment Even at 5%, a high rate in this lending rate environment, a $100,000 loan should not cost more than $600 a month. Taxes, insurance and utilities could push it to $1,000 a month.
If the loan itself is $1,000 a month your dad should refi and use a mortgage broker to help. Yes, a mortgage broker. They know all the ins and out of that loan business. There are plenty of programs to help homeowners today and most are connected to the government.
Do you know how much the home is worth? With good credit and maybe using a local credit union or small bank, your folks could refi the loan at 4% or less and get a much lower payment, maybe as low as $400 a month.
Are you and your siblings living at home and helping with the home costs? How much does you mom make? And how much will your dad make with unmployment comp? What are his job choices and does he have skills to do contract work as an independent. What I see is a really low mortgage, better than most folks are facing today. The benefits of retaining good credit in the wake of this depression are worth it if your family can stay the course.
Firstly your parents are not old! They are not past their use by date and are still capable of earning a living. There is no fun in retirement - but perhaps at this stage of their lives self employment is rather more empowering than working for someone.
Their mortgage level is very affordable - cheaper than rent - so I do not see those payments as an issue - rather your Dad just needs to get some work and the children at home could pay rent!
Taking the money our of the IRA and buying silver is a great idea - there is a possibility that this silver could in time pay off the mortgage! Other issues to consider are whether there are any grandparents still living that may pass on an inheritance to your parents (I know that my inheritance would pay off my mortgage so even if things are hard for me there is that reassurance though I hope I don't receive it for a long time), and also how your parents view their assets. I view mine as being my children's inheritance and that when I go they will be okay. The family home is not something that I would risk.If your family do want to go high risk and feel that silver could do the fantastic things we all hope, and if there is sufficient equity in the home, then a second reverse mortgage (a mortgage that pays itself, eroding capital) invested in silver could be an option. But the risk is that silver doesn't perform the way we anticipate and all could be lost... The burden of worry is also a factor. If I were your parents I would swap out of the IRA into silver. Hopefully your Dad (and maybe Mum might like to work more?) gets some work, then they just save by buying an oz or two each week of silver. How old are the children? If they are adults I think they should pay rent and contribute to household expenses!
Agree with AGXIIK re seeing a mortgage broker! Where I live a $100000 mortgage is nothing so I might be off target there...but still cheaper than renting?
Also 'throwing money their way' sounds a bit gross and smacks of a bad attitude! It is not respectful and sounds full of swagger and impudence! Are you free-loading?
Mike said "I think there comes a point in time when the common man has to stand up to these fuckers and just stop paying them"
What a bunch of crap! Were your parents forced sign a mortgage at gun point? Do you or your parents have any integrity? To willfully default is a crime. Sounds like you can eat peanut butter and bread one week, potatoes the next and pour every spare penny into paying off the debt. It's not easy. It's not fun. Man up and do the right thing!
Consider selling and downsizing. Sell assets like cars that you owe money on and drive beaters. Have yard sales and sell all that useless crap which no doubt fills the home your parents have lived in for thirty years. Increase the deductible on your car insurance, eliminate cell phones and get a land line. Eliminate cable & internet along with drinking and smoking.
Eliminate all unnecessary expenses, get out of debt ASAP. You said "we have five living with us". Five people could easily knock out 100k in six months or less.
To do what you are suggesting makes you no better than "these fuckers" you want to default on. You can beat them or join them.
Everyone in the coming US police state will be fucked anyways...
I suggest you and your american family kindly bend over for your government and take it up the ass while saying thank you.
US sucks.
Something the Phyzz crowd is missing is this:
A sufficiently motivated central bank can always cause inflation.
I like silver, but when inflation starts to run that house is a leveraged asset. It is very likely to appreciate in value faster than the physical silver you get by redirecting those mortgage payments.
Case and point... If you redirected a years worth of mortgage payments (and got to live in the house for free) you would have $12K of physical silver. If (when) inflation gets to 15% that $100K house is going to rise a comparable amount.
I love silver but I don't think I would lose the homestead to start stacking in this case.
Anon 7:52 PM Are you a warden by occupation?? Mike, Have your parents talk to the mortgage holder (if known) to possibly arrange a payment plan. This will most likely be rejected, but it shows good faith. Have them look into filing for Bankruptcy protection. This has become quite tough to do with the new Bankruptcy bill passed a few years back(Do you think they knew what was coming down the road with this new law??)but worth a try. I would not recommend cashing in IRA's if possible (as noted above TAXES and penalties). As a part year business I do about 300 tax returns a year, and have seen too many mistakes made by clients rushing forward without consulting a tax accountant first. There are no easy answers just tough solutions. Good Luck
1. save the house. it has the most value to everyone in the household.
2. use the IRA each month to make the payments. You will have 30 months to get back on your feet.
3. plant a garden for your vegies
4. every working family member in the house should be paying room & board.
5. if you must choose what bills not to pay, then stop paying the credit cards.
@Gary - my inclination is to cop the penalties on an IRA and self manage the investment - if this can be done. Too many people lose all their retirement funds through management fees and bad investment. I am from Australia and cannot touch my superannuation until I am 55 and it is not a significant enough amount to put into s self managed fund as the annual charges are too high. Still I watch it paying the managers a healthy fee each year as the amount (I am not working at the moment) diminishes in value. Only 5 years 'til I'm 55 though and it will be out in a jiffy! Superannuation is compulsory so I had no choice but to put the money in...
No I'm not a warden Gary. I'm a realist. The original poster basically wants his parents to walk away from an obligation they took on willingly. That is illegal. He further asked for a wide range of advice. I've given mine.
The purpose of owning a home is to provide for your future security by not having to make mortgage/rental payments during retirement. Decisions were obviously made to cash out that equity. (security) Decisions have consequences. I've been there.
I have not suggested a single thing to Mike that I myself have not done. Six months, to one year of pain to gain a lifetime of debt free living is a very good trade. I bought a twenty year old toyota ten years ago for $1500. In that time I have banked $80k by paying car payments to myself. The sense of security I've gained from that is immeasurable.
Perhaps if Mike and family do as I suggested and get themselves debt free, they'll look back on this time of their lives with such disdain that they will never live in debt again. The "fuckers" he refers to, make their income from the interest they charge. You want to beat them? Deprive them of their income!
These klutzes who think you should pay off your mortgage need to ask themselves a simple series of questions: What is money? (Google it); What constitutes a loan? (You will struggle with that, having read your advice about paying back what you were loaned.); Did the banks actually lend money or was the amount simply a ledger entry?; If it was a ledger entry did any money actually change hands or was credit simply extended via financial legerdemain? (That is, simply opening a ledger account and creating credit out of thin air. A banker doesn't need money in the vault to extend credit nor does he need to earn it to cover the checks he writes; he simply prints or covers it with other credit notes, a simple Maddoff ploy. If you can't figure this out, you're the "mark")
An interesting variety of comments on this issue for sure but even more interesting is that not one single person asked about the equity in this family home. If there is significant equity, walking away from it would likely be a HUGE financial mistake. This is that famous "skin in the game" that all the talking heads on TV mention and it is important. Equity = ownership and ownership IS the way to increase your wealth and your standard of living. If you never own anything productive, chances are pretty good that your net worth will never amount to much either.
The other aspect worth mentioning is how important it is to prioritize. 1st make sure that you have a roof over your head. 2nd make sure that you have adequate food. 3rd make sure that you have sufficient heating in cold weather. After that you can worry about all the other things.
As a silver collector, I LOVE silver! I would not jeopardize my home for it, though. As one responder said, we don't know WHEN silver will break out to the upside in the huge rally we all expect. It could happen tomorrow... or 5-10 years from now. None of us knows. As others have said, the market can stay flat longer than we can stay solvent... so be real careful before betting the farm on unknowable future event outcomes.
My parents are debt free besides the house and i don't see how you can pay down debt if you aren't working (from my dad's perspective). Not sure what his comp will be yet but yes, he's been in his field for 30 years and I've told him to seriously look into building some type of business of his own/start his own gig. We aren't big spenders, we don't waste money (at least not in the past 10 years. I work and am in school and will have my own student loans to handle once I graduate). I reject any notion of me being a freeloader. We'll be taking a look at pricing and downsizing as much as possible. This really isn't new to us because we've lost jobs in the past. My biggest thing is looking at the options and i wanted to hear some ideas from the silver doc community. so thanks again for the input.
@anon 11:09, i lean towards your way of thinking by the way
ok - I take back freeloader suggestion. cheers
This is separate from the consideration of whether or not to stop making payments:
Nobody has brought this point up, but how can you live in a home for nearly 30 years and owe $100K?
Sorry, don't mean to be blunt, but the term, 'personal responsibility' comes to mind. Exactly what was purchased with the loan that was apparently made against the house?
Mammoth - and anyone else... firstly a $100,000 mortgage is nothing - this has already been stated - also we don't know the equity in the house - this has also been stated. But honestly to question a mortgage of $100,000 is pretty miserable - it could have been a renovation plus maybe a family holiday not otherwise affordable. Maybe the thre children needed braces, maybe there were medical bills, maybe Mike robbed a bank and his parents had to pay for the solicitor!!! But I repeat - $100000 mortgage IS NOT BIG!!
How much are you willing to help? Is it possible for your parents to live with you, or someone, for a short time? That way they could rent out the house until their fortunes improve and be able to make the mortgage payments.
Of course you should not stop paying a mortgage of $100,000 if $150,000 of $250,000 - inital - had been paid.
EC
You should sell that bitch of a house and repay their paper debt. Starve the pricks of their rent. I guess everyone on here doesn't realise that if all debts were paid off, there would be no need for banks and therefore the money system as we know it, (credit or debt based dollars) would fold. If you don't find that incongruous there's something wrong with you perceptions of money.
Question your perceptions with this; What are the properties of money that make it money? In other words,; What do we ask of a token of exchange for it to be accepted as money? Aristotle figured it out thousands of years ago so why isn't it a given in this day and age?
Mike said "I reject any notion of me being a freeloader."
Are you daft? It sounds like your parents still have a semblance of integrity. You encouraging them to willfully default proves that you do not.
Your parents bought that house in what, 1981 or 1982? They probably paid about $50k for it as they have already paid, according to you, $150k. I'd bet money that your parents, along with millions of Americans, used their home as an ATM machine by way of cash out refi since they still owe $100k.
I would guess that you are 18-22. If your parents are seriously considering financial advice from a wet behind the ears kid, they need their heads examined. What was the point in them owning a home in the first place if in the end they end up renting for the rest of their lives?
To your parents:
Listen to but ignore advice from deadbeat son. Cash in the IRA (potentially without penalty) and use it to save the home. Sell everything you can live without. Cut all expenses to the absolute bone. Charge the underage freeloading kids a reasonable rent and share of the other expenses. Take on (part time) second jobs. Pour every single penny into owning the home free and clear. Only after exhausting every option should you consider default. At your ages, there will be MAJOR, lifelong ramifications to defaulting. Get some professional advice from someone with integrity.
Anon 7:57 - ooh a bit harsh but generally good advice. I think Mike is a bit older and has good intentions but no wisdom yet - he will realise one day and I hope he just smiles at his 'wet behind the ears' approach. His parents obviously do not want to curb his enthusiasm and have found merit in the buy silver argument. But Mike, just do as the wise ones here suggest... one day you too will be our age and you will reflect on your energetic youth - gosh I was trying to get my folks into shares in around August 1987 ;-) - luckily they didn't buy! Has been a good thread to read this one!
underage should read non-underage
One more tip for dad. Take ANY job you can get! ANY job! That will look far better on a resume than "laid on ass for 99 weeks sucking on the govt teat."
This article may help: http://dont-tread-on.me/?p=11262
By the way, all these people who commented before me, are assuming that the dollar will still be around 2 yrs, 3 yrs, 4 yrs, down the road and etc.
The truth is, nobody knows. So the way I see it is, pay only minimum. Let the game drag on as long as it wants to. All that DEBT will be wiped away and it will be a glorified FIGHT CLUB moment where we are "one step closer to financial equilibrium."
Anon 10:28 PM Maybe because I have my IRA's in a credit union my custodial fees run only $10 a year. Are your IRA's with a broker?
Irving, you are partially correct that the dollar may not be around. One thing for certain is that the value of the dollar will be toast. Externally, meaning outside the US, the dollar will no longer be used. Internally, I still expect the dollar to be used although greatly devalued.
Until the Federal Reserve Note (dollar) is rescinded, it will continue to be used to settle debts. One advantage of fixed rate debt like a mortgage, is that until the FRN is rescinded, banks MUST accept it in repayment of debt. If you can invest your FRN's in an appreciating asset you can then sell those assets for FRN's to pay back debt at a greatly reduced "real" cost to you.
I sincerely doubt that "All that DEBT will be wiped away" as you say. Please explain how this magical debt erasure will come to pass.
irving
suppose a friend or family member owes you 5 or 10 grand. will that debt be wiped away as well?
I like what Jeff Nielson (Bullion Bulls Canada) proposes. A Benign default. In this scenario only the principle would be paid back. As far as personal loans, they should stay personal.I don't buy into the NESARA hype.
Gary - this is Anon 10.28 - I am an aussie and don't have the option of placing my funds in a credit union. If you don't have enough $ for your own self managed fund then you have to go to a fund manager. Even if you choose the low risk option (the fund managers usually offer an investor a choice of low-risk through to high risk portfolio options within the one superannuation scheme) that exposes you to investment in government bonds, and fees which are % calculated.
Anon 10.28 That really sucks. Did the Banker Elites kept Credit Unions out of Australia?
January 7, 2012 11:09 PM
Completely on Track! Banks don't risk Capitol to create currency for buying a house.. So they are Risking Nothing! Where as your house is on the line.. Under Law, was this fully Disclosed to you, I doubt it.. And on top of that they Fractionalized what they created, so they have already been paid! Anyone ever read Modern Money Mechanics!
The bank puts up nothing, it is your Signature that Creates the Currency.. They put up Nothing and you your house.. Where is the Equal Consideration under Law?
Is the Banks Signature on that Loan, somehow I doubt it.. To be a Full Lawful Contract, it take two parties Signatures..
Anyone ever read House Joint Resolution 192 ! Under the restructure of America's third Bankruptcy.. Debt was supposed to be Discharged! There is No Lawful Money to pay your Debt.. You don't own the house anyway.. Your Legal Straw man does, and your Straw man is owned by the Government.. If the Name is in all Capitols, that's not YOU! "YOUR NAME" That is a Legal Fiction.
YOUR NAME was set up for the Bankruptcy with your Birth Certificate, which is a BOND, floated on Wall St. Owned by the Federal Reserve.. Under H.J.R. 192 it is Impossible for you to own ANYTHING!
Read "The Act of 1871 If you don't know this, it will Blow your Mind..
Click on link inside this link, just to show you Ron Paul Knows!
http://www.dailypaul.com/138686/the-act-of-1871-is-this-the-source-of-all-our-problems
A lot of variables exist -depending on the state that you live in. Time frame can be affected by the type of foreclosure that your state uses. Judicial and Non-Judicial Foreclosures. (Google it ) The other thing to consider is can the lender/bank sue/pursue you for a Deficiency Judgment also varies by state(i.e. you owe $100K they sell at auction for $50K but they tack on all the junk fees, late fees, interest owed, legal fees,BS fees even more BS fee, the BS fee for owing a BS fee, plus insurance,repairs, maintenance, Property taxes. ) One could end up with a judgement for $60K - $90K plus legal fees to try to fight it. A judgement normal you can have your wages garnished. Then a BK would be the only way to get rid of the Judgement ( the IRA would be safe in a BK -but not Phyzz.)
Gary - anon 10.28 here - woohoo - I did some more research on super in Australia and found that one of our banks has devised a self managed super scheme with low fees!! $699 per annum. The general advice given by the financial services industry is that you need a minimum $200,000 to justify setting up your own scheme. (btw we do have credit unions but it is not relevant to our super situation here - must be different to where you are). I can also invest directly in precious metals through my self managed super fund (more woo hoo). So I am going to take a little risk and put my super into silver. Thanks for the comment as it has resulted in me looking a little further :-) and finding this fund!!
Lets say you have a 1500 a month payment and your even on your equity or close. Lets say your 3 payments down which is what's needed for a foreclosure so $4500... Lets say you stop paying the mortgage and spent half your mortgage payments for the next 3 years so $750x36=$27000 on physical silver and you kept the other half for living expenses. How, just require the bank "produce the note", (google it) as well as the proper assignment protocols for any change of ownership which there are sure to be many if your loan is serviced by MERS. Until "the note" is produced, stay in the house for free, plan your next move and get a considerable amount of PHIZZZ. The reality is when common people realize and accept that silver is also the worlds strongest anti-bacterial, silver will be more valuable than gold an people with gold will be left holding the bag!
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