I follow a really good mortgage blog and today’s topic was on inflation. If you\u2019re like me, you\u2019re probably worried that when the government prints $Trillions as part of a stimulus package and gives it to the country to spend, it\u2019s bound to cause inflation. Generally we think of inflation as a bad thing (everything will cost more), but real estate can be a bit unique if you\u2019re a holder. It makes sense that as prices for everything go up, that the value of your real estate holdings will go up as well. But also, if you\u2019re a fixed-rate mortgage holder, you know that your payments are fixed for the life of the loan. That means that the loan is being paid back in future dollars that are worth increasingly less and less compared to today.<\/p>\n\n\n\n
Future dollars can be a bit tricky to understand, so think about it this way\u2026 Say the principal and interest of your mortgage payment is $100\/mo and we head into a year of 5% inflation (which is pretty high). As inflation hits, prices, salaries, real estate, etc all drift up. Fast forward a year and you\u2019re still paying $100\/mo, but because the value of your dollar has fallen, that $100 payment is effectively only costing you $95!<\/p>\n\n\n\n
Of course, this assumes that income and other business expenses also track inflation, but it shows the positive side of inflation that many investors often overlook. In this simplistic example, not only is the value of your property worth 5% more, but you paid it back with dollars that cost 5% less, effectively \u201cdouble-dipping\u201d. You gotta love real estate!<\/p>\n","protected":false},"excerpt":{"rendered":"
I follow a really good mortgage blog and today’s topic was on inflation. If you\u2019re like me, you\u2019re probably worried that when the government prints $Trillions as part of a stimulus package and gives it to the country to spend, it\u2019s bound to cause inflation. Generally we think of inflation as a bad thing (everything […]<\/p>\n","protected":false},"author":1,"featured_media":230603,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_et_pb_use_builder":"off","_et_pb_old_content":"","_et_gb_content_width":"","om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[37,36],"tags":[],"acf":[],"yoast_head":"\n