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PrimoTenore
PrimoTenore vip
P&P Score: 34.57   Points: -9.80   Accuracy: 52.08%   Average Pick Score: 1.60   Annual Return: 9.49% (38.10% since 2/7/08)  

PrimoTenore's Blog : Safest Investment? Pay Down Your Mortgage!

Date October 15, 2008    Comments Comments (4)    Rate this post Recommend This Post (128)   
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Free Options Trader Guide
OK, I'll admit I slept through most of Macroeconomics 201. So I'm no Krugman, but here's a serious question.

If the yields on the safest investments available are at an all time low, isn't it time to consider that check you write every month as an even safer investment?

Suppose you're paying 5 or even 6% on your mortgage. Doesn't a guaranteed 5% sound pretty great right now compared to the available alternatives?

Granted, this approach isn't for the high flyers on the leaderboard here who scoff at a 5% return as child's play. But for anyone looking for absolute safety, what could beat paying down principal for a guaranteed return on your money? Depending on the way your loan is written, it may even result in lower payments for the tough times ahead.

If enough homeowners paid down principal on their outstanding mortgages, couldn't it also have some small effect on the liquidity shortage?


4 Comment(s):

Author darlin     Date October 15, 2008 14:46 Abuse this post Report Abuse
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Primo
I bought a commercial building in late 2006 with a prime rate line of credit resulting in no mortgage on the building. Commercial mortgages were in the 10-12%range. That LOC was 8.25% in 2006, but after the last rate cut it is 4.5%. Of course there is an annual renewal fee of $50. I checked with FNB to see if there would be any problems looking ahead due to "credit crunch". I was told no FNB has plenty of money to lend. I haven't been in any hurry to pay off as I calculated the building would pay itself off in 4-7 years depending on increasing utilization of vacant offices and apartments.
I do have a couple of small mortgages @ 5.5 & 6.5%. Maybe I will consider those paying off.
Author JoeCole     Date October 15, 2008 21:54  Edited: October 15, 2008 by JoeCole Abuse this post Report Abuse
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I'd like to buy an apartment building now, my rentals have been 100% for over a year now, that was unheard of for the previous years because everyone was trying to buy a new home. I can buy properties cheaper, but lease rates are higher. Very profitable. The flippers are the ones that got hit. No one is buying now because credit is tight and fears are high. Offer a price and if they say no, oh well.
Author SpecialwhenLit     Date October 16, 2008 05:29 Abuse this post Report Abuse
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Want a better than 5% return...pay off (and stay off) those Visa & MasterCard statements. Better still, get rid of ALL retail card balances. An Unplastic Christmas this year...that will be a challenge.
Author darlin     Date October 16, 2008 07:34 Abuse this post Report Abuse
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Real property investors aren't selling unless they are over-leveraged and forced out. Look for property that is part of an estate that needs to liquidate. Prices(actual sales)are about 50-66% of asking price which has probably already been reduced. Buy, appeal tax assesment, wait 5-10 years and sell.
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