Home ownership

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Author Message

Man Ray

Dmitry.

Your book was a fantastic and enlightening read. Thank you for writing it.
My question:
Because my wife and were both indoctrinated into the sham of home ownership at an early age, we currently have a mortgage of around 80K. We are convinced we'd be better off cashing out our retirement and paying it off so that when the collapse comes that we actually "own" our place of refuge. If, in the event of a major shitstorm of the economy, we didn't pay it off what could feasibly happen to our home? Would it be better to invest that retirement money in something besides the home? I'm convinced if we don't cash out our savings that it won't be around for us to do so in 20 years. I realize you aren't a financial adviser (although you are a lot smarter and wiser than that lot) but we'd love to hear what you would do in our situation.

Thanks for doing what you do.

Tuesday 26 July 2011 02:35:37 pm

Dmitry Orlov

There are potential pitfalls no matter which way you turn. Yes, it is very likely that your retirement funds will be worthless by the time you can use them, nor is social security likely to be around by then. Yes, there are risks associated with holding a mortgage: in the event of economic upheaval the lender can call in your note, or simply throw away a couple of payments and then foreclose on you (that's happened quite a bit lately). But even if you own a place free and clear, you are stuck somewhere where the necessities of life may not be easy to come by in the future. I think the best way to think about it is this: use what you know will be worthless (retirement funds) to lower the risk and cost on holding onto what is and will remain useful for some time (your home) by paying off your mortgage. Then the mortgage payments can be used to make your home livable without municipal umbilical cords (a 12V system for LED lights and communications with solar panels and a small wind gen for power; rainwater collection/filtration system with a big cistern or two; solar water heater, kitchen garden, composting toilets instead of sewage, greywater for kitchen garden irrigation, etc.) Once you eliminate the opportunity cost of holding the mortgage, that would free up a few hundred dollars that you will be able to invest every single month. A few years from now you may find that your cost of owning your house is suddenly much lower, so you'll be able to cut your income. That seems like a reasonable path to me.

Wednesday 27 July 2011 07:05:12 am

Man Ray

Thanks, Dmitry. Very sage advice. If I might ask a follow-up:
We live in an urban environment. We've considered selling our place and moving to a more rural (and less expensive) area. I know that in your book you don't necessarily champion the idea of "moving out" because the city will offer more in terms of resources and possibilities. That said, the urban environs also equates to more desperate folk who might want what you have. Do you still favor the idea of a sustainable urban homestead over the rural option?
Much thanks for your sound advice. I've recommended your book to all my friends and family.

Wednesday 27 July 2011 10:24:17 am

Dmitry Orlov

The particular problem I have with rural homesteading is that more often than not it presupposes the ability to drive, which should not be taken for granted moving forward. Also, the more diffuse the population the harder it is to provide security and communications, the more labor has to be invested in road maintenance, and so on. The best rural settlement model I can imagine is a small town surrounded by farmland, on a river or a harbor or a canal. Then again, many urban areas in the US lack any of the urban advantages, being car-centric, unwalkable, and, on top of that, incredibly run-down, ugly and alienating.

Wednesday 27 July 2011 11:41:33 am