Home Mortgage and PMs

G

Gorth

New Member
Hello SS,

I'm considering my personal finance strategy and thought I'd ask for some alternative perspectives from the group.

I have an investment property that is currently absorbing a large proportion of my disposable income. My goal is to keep getting ahead of the repayment schedule and retire that debt ASAP, because who likes paying interest? Haven't done so well, so far, but my discipline is improving.

Instead of committing all of my available income to the mortgage, would it also be prudent to set aside a small portion for monthly PM purchases, as a diversification/savings strategy and/or wealth preservation strategy and/or hobby? If I put all my savings into the house, surely that's as risky as putting them all into PMs; eggs and baskets after all. If I decide to direct some of the payments into PMs, then it will take longer to repay the loan, but I will end up with a small reserve in the form of PMs.

Let me know what you think.

Gorth
 
Sell the house and buy croc's, lot's of croc's.

free yourself from the hold the bank has on you, the last thing you want is to be in debt if SHTF man.

since it's an investment property and not your home, pffft.. imagine how many croc's you'll have and all that free'd up money,
no mortgage, rates, insurance, you can save heaps for the upcoming lunar goat series, then the kook's, your gonna want lot's of spare cash for that.
 
Nothing wrong with diversification, keep paying off the property and accumulate over time. In the long run you will have an investment property plus a decent stack in your pocket.
 
LovingtheSilver said:
Nothing wrong with diversification, keep paying off the property and accumulate over time. In the long run you will have an investment property plus a decent stack in your pocket.
Click to expand...
But everyone wants to be rich yesterday :)

But seriously, as long as negative gearing is there I'd keep going with the investment. You made it sound like you are putting a bit more than the minimum, which is awesome. If I were you I'd find an amount that your comfortable with diverting to pm's and do that. Like for example say your minimum is $400 a week and you're currently paying $600, I'd probably divert $50-100 per week towards pm's and keep putting that extra $100 a week to the investment property($400 min $100 extra)

Me personally, I'm focusing on getting rid of my mortgage with the vast majority of my disposable income(excluding entertainment expenses ofcorse) and hope for it to be gone in the next 18 months. Then I'll focus on pm's, managed funds, direct shares, ect. End of story I know the benefits of borrowing to invest, but I do not want a single dollar of debt that I do not need to have
 
If an IP is financially crippling you, you're doing it wrong. Your first mistake is repaying principle on an IP.
 
miniroo-quote. "free yourself from the hold the bank has on you, the last thing you want is to be in debt if SHTF man."



we have a mortgage on our home (no investment properties) but want to stack PM's and i'm also torn between smashing the mortgage and aquiring a stack too.
i don't like debt either but we have no choice if we want to own a property one day. OWNING a self sufficient rural property when SHTF is a smart move, imho. i just hope the owning comes before the SHTF.
 
Agreed. I would go interest only on the loan and free up some cash flow.
Would you rather repay the principle today or in 20 years time when the debt has been eroded by inflation.
Save excess funds in an offset account as a buffer, this still leaves your options open and gives you some breathing space whilst reducing interest payable at the same time.

I would also suggest sitting down and looking for ways to increase your rental yield on the property.
Dependant on its location and local council, granny flats can be awesome for this. Think transportable for minimal outlay.
This strategy can turn a speculation (on future price growth) into an investment.
 
You are only looking at minimal gains for maximum stress. Tax implications, rising interest rates, they won't stay this low forever, potential capital gains tax increase".......I am getting a headache already.
You probably stand a 50% chance of outsmarting yourself in the long run.
 
Thanks for your replies everyone.
Reducing the hold the bank has on me is what I'm all about. I also do not want a single dollar of debt that I do not need.

BiGs, you misread the situation - the IP is far from crippling me, but I don't accept the idea that holding an investment should necessarily involve providing an income stream to a third party for 20 years. Particularly when the risk is being borne by me, regardless.

tolly_67, only a 50% chance? Damn, I thought I was better than that.


Gorth
 
Gorth said:
BiGs, you misread the situation - the IP is far from crippling me, but I don't accept the idea that holding an investment should necessarily involve providing an income stream to a third party for 20 years. Particularly when the risk is being borne by me, regardless.
Click to expand...

A third party benefits from you earning your money, spending your money, holding your money as fiat or investing your money regardless of where you invest it. This is how the economy works. I think you have a naive view of property investing. With that thinking, why invest in property at all?

If you are talking about putting spare cash into the offset account, this is very different. You should most definitely do this on an IP, but instead of having a goal of paying off the debt, pay off enough so you have enough for a 20% deposit on the next one. As long as you don't give into the fear and sell during market depressions and have a life long hold view, the capital leverage will far outweigh your offset repayments averaged out.

I hold a 5% weighting of my exposed property and stock capital in PM. I stick to the 5% and let this decide whether I buy or not, instead of speculating. Every time one of my IPs gets a new higher appraisal, I adjust my PMs accordingly. Perhaps you could implement a similar system.
 
miniroo said:
Sell the house and buy croc's, lot's of croc's.

free yourself from the hold the bank has on you, the last thing you want is to be in debt if SHTF man.

since it's an investment property and not your home, pffft.. imagine how many croc's you'll have and all that free'd up money,
no mortgage, rates, insurance, you can save heaps for the upcoming lunar goat series, then the kook's, your gonna want lot's of spare cash for that.
Click to expand...


actually if the SHTF and inflation skyrockets I would want to be in debt, as you will pay it back a lot quicker especially if you have a fixed interest rate.

To think if I was in Zimbwae I would have been able to pay my mortgage with one bank note with change.
 
Court Jester said:
actually if the SHTF and inflation skyrockets I would want to be in debt, as you will pay it back a lot quicker especially if you have a fixed interest rate.

To think if I was in Zimbwae I would have been able to pay my mortgage with one bank note with change.
Click to expand...

Unless the banks get the govt to pass laws indexing loans to the inflation rate

In the interests of financial system stability of course
 
trew said:
Court Jester said:
actually if the SHTF and inflation skyrockets I would want to be in debt, as you will pay it back a lot quicker especially if you have a fixed interest rate.

To think if I was in Zimbwae I would have been able to pay my mortgage with one bank note with change.
Click to expand...

Unless the banks get the govt to pass laws indexing loans to the inflation rate

In the interests of financial system stability of course
Click to expand...


I doubt it, as they can already raise / lower their interest rates interdependently of the reserve bank, as they see fit. If I was smart enough to fix my loan before hand I should reap the benefits in that situation.
 
1. What do you expect to be paying in interest? (i.e., 6-7-8%?)
2. What do you expect as an annual price change if you buy PMs?

It depends on your expectations and risk appetite.
 
Court Jester said:
trew said:
Court Jester said:
actually if the SHTF and inflation skyrockets I would want to be in debt, as you will pay it back a lot quicker especially if you have a fixed interest rate.

To think if I was in Zimbwae I would have been able to pay my mortgage with one bank note with change.
Click to expand...

Unless the banks get the govt to pass laws indexing loans to the inflation rate

In the interests of financial system stability of course
Click to expand...


I doubt it, as they can already raise / lower their interest rates interdependently of the reserve bank, as they see fit. If I was smart enough to fix my loan before hand I should reap the benefits in that situation.
Click to expand...

Under normal circumstances I would agree but in desperate times anything is possible

This did happen in Argentina so it's not completely impossible - although I agree unlikely
 
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