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  • FIRST POST
    • Agrav
    • By Agrav 8th Jul 18, 9:44 AM
    • 5Posts
    • 0Thanks
    Agrav
    Interest Only Mortgage and Gold
    • #1
    • 8th Jul 18, 9:44 AM
    Interest Only Mortgage and Gold 8th Jul 18 at 9:44 AM
    Good morning,

    Humour me with this one, please.

    Let us assume that we are going to enter a property market crash in 2020/2021. As we know, if that were the case, this current moment in time may not be the best to purchase property - you would probably want to wait until the crash bottoms out, buying then. Even with this being the case, let us assume we have to buy a property NOW due to life circumstances.

    How would you defend against an imminent crash and decrease in property value?

    I have been toying with the idea of utilising an interest only mortgage and with the money that would have been spend on capital repayments, buy gold. Gold has historically increased in value during market crashes and I do not see this changing in the near future or maybe ever (until national or worldwide currency is tied to a cryptocurrency...). In the calculations I have run, the potential decrease in property value of around 15% is largely, if not wholly offset by the increase you could see in the value of gold and your investment in it.

    I was wondering if I am missing something obvious or if someone has an opinion on this, whether positive or negative?

    Do you have any other ideas that would protect your wealth if you knew that your property value would decrease through your ownership of it?

    Thanks for your thought and replies.

    Thanks again,
    Lee
Page 1
    • sal_III
    • By sal_III 8th Jul 18, 12:41 PM
    • 644 Posts
    • 657 Thanks
    sal_III
    • #2
    • 8th Jul 18, 12:41 PM
    • #2
    • 8th Jul 18, 12:41 PM
    Long term - 10+ years the property value will be higher, even if there is a crash in the next couple of years. If you are looking for long term home - just go for it and ignore the lower price interim.

    If you are in for a short game, why buying property at all? just buy gold...

    I will tell you what I did - I bought a new build with 40% HTB equity loan - if the price falls it will be cheaper for me to repay it. If the price goes up, I will overpay the mortgage instead. win-win
    • AnotherJoe
    • By AnotherJoe 8th Jul 18, 4:36 PM
    • 10,609 Posts
    • 12,139 Thanks
    AnotherJoe
    • #3
    • 8th Jul 18, 4:36 PM
    • #3
    • 8th Jul 18, 4:36 PM

    I was wondering if I am missing something obvious or if someone has an opinion on this, whether positive or negative?
    Originally posted by Agrav
    Yes, your basic assumptions are built upon sliding sands so all the other guff/speculation is pointless.

    For example even if there was a crash you've assumed that property crash = market crash but the two may not be related. World markets could rises and houses prices here crash, gold may not rise etc etc.


    You've also assumed that you "have" to buy whereas of course you dont, you could rent. What possible circumstances would force you to buy instead of rent? Hmmmm ... I suppose a partner fed up with your stupid assumptions might be the only one


    In any case if you are so hot at spotting property and market crashes three years out why arent you already a billionaire and why would you need to ask advice here?

    P.s if you plan to get an IO mortage and tell the lender your cunning plan to repay it is to buy gold, wear padded trousers so you don't hurt yourself when they sling you out on your *rse.
    Last edited by AnotherJoe; 08-07-2018 at 5:39 PM.
    • Thrugelmir
    • By Thrugelmir 8th Jul 18, 7:23 PM
    • 59,807 Posts
    • 53,153 Thanks
    Thrugelmir
    • #4
    • 8th Jul 18, 7:23 PM
    • #4
    • 8th Jul 18, 7:23 PM
    How would you defend against an imminent crash and decrease in property value?

    Originally posted by Agrav
    Providing you continue to pay the mortgage. Then the value has no relevance. Once paid for the property is yours. No rent to pay.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • enthusiasticsaver
    • By enthusiasticsaver 8th Jul 18, 8:10 PM
    • 7,072 Posts
    • 15,314 Thanks
    enthusiasticsaver
    • #5
    • 8th Jul 18, 8:10 PM
    • #5
    • 8th Jul 18, 8:10 PM
    Property crashes don't matter if you are buying and selling in the normal scheme of things. If you intend selling and moving your property will be worth less but so will the property you are buying. We have always taken the view we buy a property to live in and don't treat it as an investment. It is illiquid, susceptible to market fluctuations and requires maintenance.

    Now we are mortgage free it does not matter if house prices crash in two or three years time. They will increase at some point in the future. I certainly would not be betting on gold.
    Debt free and mortgage free and early retiree. Living the dream

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages and Endowments, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • jonnygee2
    • By jonnygee2 8th Jul 18, 8:38 PM
    • 308 Posts
    • 308 Thanks
    jonnygee2
    • #6
    • 8th Jul 18, 8:38 PM
    • #6
    • 8th Jul 18, 8:38 PM
    There are loads of ways you can avoid, and even profit from, crashes if you know when they will occur. The problem is, you don't know. So you might just end up losing a load of money in gold investments etc.

    And if you were someone who believed that property would definitely crash, it seems you'd just rent a house and wait for the prices to fall. If you did what you are describing, when the crash came you'd have no access to enough capital to actually buy a house and take advantage of the cheaper prices. Your gold would not be worth enough by 2021 and you'd already have a loan out on the higher house price.
    • middleclassbutpoor
    • By middleclassbutpoor 8th Jul 18, 11:58 PM
    • 257 Posts
    • 217 Thanks
    middleclassbutpoor
    • #7
    • 8th Jul 18, 11:58 PM
    • #7
    • 8th Jul 18, 11:58 PM
    I think until supply outstips demand, a crash wouldn't happen but thats for another board on this forum.

    As others have said, buy a home not an investment and view the challenge of how you can repay it as quickly as possible rather than how can I protect the value of my home by risking it on a volatile assets such as gold.
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