Advice Needed

[silverbullionMember]

Ok, guys (and girls), I need your advice in order to make an informed decision.  I am going to try and keep it sweet and short.  We have the opportunity to move into a bigger house that’s selling far below its market value, but it will mean that we will have to take on more debt.

We’re currently staying in a sectional title complex, which means we have to pick up the bill for a lot of expenses that have zilch to do with our unit (structural damage to other units, water damage, et cetera). The cherry on top:  They work out our portion of the expenses according to the square meters of our unit (93 m2), which is relatively high in comparison to the square meters of some of the other units. We live in a decent 3-bedroom, 2-bathroom unit, but because some of the other units are in such a shitty condition (pardon my French), it drags down the value of our unit as well. Now we have the opportunity to buy a 4-bedroom, 2-bathroom house (290 m2), which is located in a yard which covers 1377 m2.  It is selling at 28% below market value in a very good neighbourhood and the rates and taxes payable are more than 50% lower than where we currently stay. In order to do this, we will have to sell our current unit and depending on the price we get, will have to ask the bank for a top up to our existing home loan. We will definitely have to pay more towards our mortgage every month, but I feel staying here in the sectional title complex is going to ruin us at the end of the day (due to all the unforeseen expenses relating to other units that we have to pay). Needless to say, we bought the unit in the sectional title while we were still young and stupid.

Now my biggest concern if we decide to go for the bigger house is that we’re not going to be able to cover our mortgage payments if interest rates rise beyond a certain point. We have a couple of hundred ounces of silver to fall back on, but I don’t intend to sell any of our silver to cover mortgage payments. The idea is to keep the silver and only use it in worst case scenario: After the complete collapse of the fiat- and/or debt-based monetary system. Now I might have the cat fully by its tail, but I expect that hyperinflation is going to destroy all fiat currencies and fiat-based debt in the process. What I am scared of is the short period of time we might sit with deflation before the hyperinflation kicks into full gear, the period of time in which they might raise increase interest rates to the point where many of us simply cannot afford our mortgage payments. There you have it, my dilemma. Any advice will be appreciated.

[AGXIIKMember]

Silver Bullion  Maybe renting or leasing a good home would be a better idea (with its exit strategy of giving the landlord notice) If the world’s financial conditions grow worse and affect every Average Joe and Jane, having a large mortgage with a more costly overhead might not give you the back door options of renting.  If rental rates for decent homes are less than the cost of buying and land lords have to pick up the ancillary expenses such as maintenance, taxes etc, the landlord may just want to have people in their home to keep it in good shape. You are clearly a good risk and thoughtful person judging from the quality of your essays.  A land lord should be happy to have you as a tenant.  He or she may even be losing money on the unit since the overhead is more than the going market for rentals. This is commonplace in the US as the rental market is strong but overhead costs of owning a home for rent seldom pans out for the landlord due to the normally larger than average costs of housing overhead. 

[AGXIIKMember]

2 more thoughts   If the economic conditions worsen you may find that ideal home going for a better price. If you rent you can always negotiate with the LL for some rent abatement but a lender will go tell you to pound sand.  IMO

[UglyDogMember]

SB – only purchase if you have a fixed rate mortgage and can do the deal with very little of your own cash involved.  Otherwise, the smart move is to rent.  The days of robust equity gains in residential real estate are over. 

[2 OZ.Member]

Several ways to look at this SB. First, I agree with AGX. Renting may be a good option. However, If you sell at enough profit to stack some cash and more PM’s, when SHTF, everything may have to be reset and debts forgiven (I wouldn’t count on this 100%) just to get the economy going again.  Getting through the first 3, 6 months to a year may be all you need. The your silver can take over. If there’s a place a little away from the city where you can garden, fish, hunt, etc. even better. An etremely hard decision but, again I agree with AGX. You are pretty sharp according to your posts. I have a mortgage but I think I’m in a good position to weather the storm for a while. Remember, the house payment will remain the same (unless they raise taxes) and if you have enough cash for a while, the silver will do you fine. I hope this helps. Carry on.

 

P.S. Oh yeah, you do have to keep the misses happy through this. LOL. Good luck and keep us posted, Sounds like a very fine place.

[SoulSurvivorMember]

Have you considered leasing a home? It’s a common practice amongst wealthy americanos as it provides security (you could request a long term contract if desired), and may provide tax benefits. Additionally, if Miami’s Zombies migrate to your area, it should be easier to secure and defend a free standing home, and plant a garden.

[silverbullionMember]

Hi Guys, thank you for all the advice. Much appreciated.

Our options are very limited here in South Africa, since:

1. Interest rates cannot really be fixed on mortgages, and in extremely rare cases where they do offer it, it is only over the short-term and at huge premiums.

2. To rent is very expensive here. It costs a lot more than the monthly mortgage payments. To sell and rent now is not really an option.

Maybe I should try and find insurance to protect against mortgage rate increases?

[silverbullionMember]

2 OZ. And lol, you’re right, I have to keep the misses happy.

[silverbullionMember]

Ok guys, I’ve decided not to buy the new house, but to stay put and to rather stack more silver. Mom in Law also nagged too much about the house. e.g. front door on wrong side of house and this and that. lol

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