# Mortgages and debt



## warrick (Jun 4, 2013)

When there is a collapse, what happens to home mortgages and other debt? Could the government insist on paying them right away? Is it benificial to pay off debt asap or just wait for something major to happen and not worry about it? Lots of questions


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## helicopter5472 (Feb 25, 2013)

Seems to me that when SHTF you won't have a job, so bleeding a turnip would be magic, Banks will brake apart, I doubt they will come for your car or home. They will be worrying about themselves. Cities will be in turmoil, riots, people won't even try to go to work. The government will have enough to do for months to come. I can't see how they will worry about it. When you think about it you don't really own your property even if it's paid for since you have to pay yearly taxes, as your car, you have to lic. it to make it legal...But who knows....


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## BillS (May 30, 2011)

Debts would still be there for anyone who lives through the collapse. I see being debt free more as a lifestyle choice for today than something that's necessary for preparing for the collapse. At some point it's likely that mortgages would be indexed to inflation. If you have physical gold and silver there's a good chance you could sell enough to pay off your mortgage before that happens.

Otherwise, I think it's more important to be properly prepared than worry about your debts being paid off.


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## Caribou (Aug 18, 2012)

Your mortgage and other debt will still exist. As long as you can make payments then it is unlikely that you note will be called. Even today most banks are not foreclosing every past due mortgage as it does not look good on the books. 

I got sick a few years back and could not work for months. The fact that I had paid off my home meant that I did not wind up homeless and bankrupt. Ultimately all disasters are personal disasters. If bank personnel are still going to work you will be expected to make your payments on time.


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## Gians (Nov 8, 2012)

warrick said:


> When there is a collapse, what happens to home mortgages and other debt? Could the government insist on paying them right away? Is it benificial to pay off debt asap or just wait for something major to happen and not worry about it? Lots of questions


Probably depends how how big of a hypothetical collapse we're talking about. As long as a bank holds your title or passes it on, don't expect debt to disappear. I've always been taught to pay any loan off as fast as I can, even though many say holding debt and investing the cash is better. If it's early in your home loan you could be saving tens of thousands by just making an extra payment whenever you can. If you get a raise, you could pretend you didn't and put it towards the mortgage, and do the same with any sort of windfall. Include a notation that you want the extra to go towards principle, banks can get very confused at times


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## hiwall (Jun 15, 2012)

If after SHTF there is still rule-of-law then anything you did not own could be reprocessed.
If it was TEOTWAWKI and the only law was a gun then debt would mean nothing.
In either case if it happened rather slowly the odds of banks reprocessing many things would be high.


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## Immolatus (Feb 20, 2011)

hiwall said:


> If after SHTF there is still rule-of-law then anything you did not own could be reprocessed.
> If it was TEOTWAWKI and the only law was a gun then debt would mean nothing.
> In either case if it happened rather slowly the odds of banks reprocessing many things would be high.


^This.
It would have to be unimaginably bad for your debt to be wiped out/forgiven unless there is some kind of jubilee (laughable). Just look at our current situation. Housing crashes, big time investors move in. As long as they are able, the banks will take your home if they can benefit from doing so.
I am in the camp of paying off debts (mortgages-credit cards are a different story as the debt could be discharged without you physically losing anything) asap, investments be damned, but there are lots of differing views on this. 
Ex's: If your mort payment is $1k and you have 20 years left on it, that same 1k wont be worth crap in the future, so dont pay it off.
If your interest rate is 3% and you can do better in something else, dont pay it off.
Basically, always better to not have any debt, period.


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## invision (Aug 14, 2012)

Look at the 08 housing bubble as a prime example... Early on when it was just starting to pop, tons of people lost their homes, and banks started to consolidate, mortgages were still due - the mortgages simply changed hands... Then the government stepped in with loan modifications and some of the foreclosures stopped, as the loans were modified so people could afford them... Now, I am not sure how in a true USD collapse how things will be, but I can imagine that as the dollar value decreases, it will (for those who remain to have jobs) enable you to pay off your mortgages easier... Let me see if I can explain that comment... When Argentina had their hyperinflation bouts in 89 and 90, in 91 they set 10,000 ARS to 1 USD... That was 2 straight years of super high inflation, 3000+% increase in 89 and 2300+% in 90 before their minister of finance stepped in to set a price for the ARS... 

So, let's say we set ours to yuan, same value, but prior to setting the USD equal to x yuan, as inflation go flying up over 2 years, 3000% and 2000% - the dollar value crashes... now some employers will adjust salaries on the fly, I know I will be adjusting prices accordingly... Now with that said, suppose your salary is adjusted 2000% - in the first year - your making $100,000 before the crash - now your making $2,000,000 a year. Now, if your a prepper - start kicking into survival mode - I would - take this access cash and make payments on your mortgage, the banks can't increase the value of the loans.... So, if you own a $300,000 house with an outstanding balance of $275,000 - now you have more money coming in - $166,000 per month, and your prepared to stop having to buy most things except maybe gas... You can apply all this extra revenue towards paying off the house... The value of the load is still $275,000. 2 months and your paid off... 

Am I right on this hypothesis?


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## GrinnanBarrett (Aug 31, 2012)

The IRS, and major banking institutions have built underground facilities so that in the event of all our war or just SHTF they will go on. These guys have their bases covered. As Part of the COG (Continuity of Government) program the IRS is set up to keep right on taxing you as soon as the air clears. There would be a period of time when all you know what reigns but as soon as they can get up and running banks will be coming after those with mortgages and anyone with debts. They may lose your money but they will not lose theirs.


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## alwaysready (May 16, 2012)

invision said:


> Look at the 08 housing bubble as a prime example... Early on when it was just starting to pop, tons of people lost their homes, and banks started to consolidate, mortgages were still due - the mortgages simply changed hands... Then the government stepped in with loan modifications and some of the foreclosures stopped, as the loans were modified so people could afford them... Now, I am not sure how in a true USD collapse how things will be, but I can imagine that as the dollar value decreases, it will (for those who remain to have jobs) enable you to pay off your mortgages easier... Let me see if I can explain that comment... When Argentina had their hyperinflation bouts in 89 and 90, in 91 they set 10,000 ARS to 1 USD... That was 2 straight years of super high inflation, 3000+% increase in 89 and 2300+% in 90 before their minister of finance stepped in to set a price for the ARS...
> 
> So, let's say we set ours to yuan, same value, but prior to setting the USD equal to x yuan, as inflation go flying up over 2 years, 3000% and 2000% - the dollar value crashes... now some employers will adjust salaries on the fly, I know I will be adjusting prices accordingly... Now with that said, suppose your salary is adjusted 2000% - in the first year - your making $100,000 before the crash - now your making $2,000,000 a year. Now, if your a prepper - start kicking into survival mode - I would - take this access cash and make payments on your mortgage, the banks can't increase the value of the loans.... So, if you own a $300,000 house with an outstanding balance of $275,000 - now you have more money coming in - $166,000 per month, and your prepared to stop having to buy most things except maybe gas... You can apply all this extra revenue towards paying off the house... The value of the load is still $275,000. 2 months and your paid off...
> 
> Am I right on this hypothesis?


Thanks for making it simple I hope you are right.


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## invision (Aug 14, 2012)

GrinnanBarrett said:


> The IRS, and major banking institutions have built underground facilities so that in the event of all our war or just SHTF they will go on. These guys have their bases covered. As Part of the COG (Continuity of Government) program the IRS is set up to keep right on taxing you as soon as the air clears. There would be a period of time when all you know what reigns but as soon as they can get up and running banks will be coming after those with mortgages and anyone with debts. They may lose your money but they will not lose theirs.


Where are their banks bunkers? All of there data centers are above ground... this would also assume that the employees are still getting paid throughout the situation... can you provide links about the bank having prepared bunkers?


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## JayJay (Nov 23, 2010)

*Then the government stepped in with loan modifications and some of the foreclosures stopped, as the loans were modified so people could afford them*

Oh, hold on there:
http://www.reuters.com/article/2013/06/14/us-bankofamerica-mortgages-idUSBRE95D10O20130614

The bank allegedly used these tactics to shepherd homeowners into foreclosure, as well as in-house loan modifications. *Both yielded the bank more profits than the government-sponsored Home Affordable Modification Program,* according to documents recently filed as part of a lawsuit in Massachusetts federal court.


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## TheLazyL (Jun 5, 2012)

warrick said:


> When there is a collapse, what happens to home mortgages and other debt? Could the government insist on paying them right away? Is it benificial to pay off debt asap or just wait for something major to happen and not worry about it? Lots of questions


_What happens to the debt?_ The debt remains. Whether the Organization that you owe the debt to remains would be the question.

_Could the government insist on paying them right away?_ Yes the government could past a law requiring debts to be paid in full. Government could even require that you pay the debt to them instead of the mortgage company.

_Is it beneficial to pay off debt asap or just wait for something major to happen and not worry about it? _ Well. If you pay it off As Soon As Practical you save money in the long term unless. Unless the debt interest is less then what your savings account pays in interest.

Doctor gives you 1 month to live. You max out the credit cards, borrow all the money you can and throw one large party! Tell the mother-in-law what you really think and trade in your spouse for two 20 year olds. 

Then the Doctor calls to apologized, he read the wrong x-ray....

If you had advanced knowledge that "something major" would happen in the near future, then leveraging everything you can to top off your preps maybe the practical thing to do...but if your wrong...


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## warrick (Jun 4, 2013)

Reguardless what happens, i am putting as much as I can towards paying my mortgage off asap. All of my overtime pay goes directly to the principle.


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## helicopter5472 (Feb 25, 2013)

I agree, it's the best answer no matter what happens and how it turns out.


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## invision (Aug 14, 2012)

warrick said:


> Reguardless what happens, i am putting as much as I can towards paying my mortgage off asap. All of my overtime pay goes directly to the principle.


I am going to assume you have a fixed rate 30 yr mortgage... Besides every dime going for extra payments, instead of making one payment at end or first of month, split them into bi-weekly payments...

Following taken from here: http://financialplan.about.com/od/realestatemortgages/qt/Bi-Weekly-Mortgage.htm

The magic of the bi-weekly payment comes from the fact that there are 52 weeks in a year, thus you'd have 26 payments. If you were to simply make two payments a month that would be just 24 payments in a year, so actually the bi-weekly method has you making two extra payments each year, which is the same as making one extra monthly payment.

Here's an example. Let's say your current monthly mortgage payment is $1,000. Over the course of a year you will spend $12,000 on twelve payments. If you decided to make bi-weekly payments you can then make a $500 payment every two weeks. Seems like the same thing, right? Well, if you take $500 and multiply it by 26 payments you have $13,000 in total payments. And guess what? That extra $1,000 was applied directly to your principal, thus reducing how much you'll spend on interest and will pay your mortgage off faster.

To better understand the true savings, on a $100,000 30-year mortgage at 6.5%, you'll pay $127,544 in interest, plus the $100,000 principal, for a total of $227,544. Paying one-half of your regular monthly mortgage payment every two weeks will result in interest of $97,215, a savings of $30,329. Obviously, the larger your mortgage and higher your interest rate, the greater the savings.


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## Gians (Nov 8, 2012)

To borrow invision's example of a 30 yr loan on $100,000 at 6.5%, your first payment would be $632.07 with $541.67 of that going towards Interest and $90.40 going towards Principle. Your final payment of $632.07 would be $3.41 towards Interest and $628.66 towards Principle.
Took figures from here: http://mortgage-x.com/calculators/extra_payment_calculator.asp
Starting extra payments as early as you can will save you the most. Also check to see if you will get penalized for paying it off early...worth checking for when shopping for a loan. If hyperinflation ever happened, you'd be that much closer to using that cheap money to pay the rest of the loan off.


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