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Old Debate, New Spin..payoff morgtage with inflation coming?
Old 10-22-2010, 12:16 AM   #1
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Old Debate, New Spin..payoff morgtage with inflation coming?

Ok, apologies for raising an old debate, but...

Thinking about paying off my mortgage.

With the likelyhood of inflation, doesn't it make sense to keep the mortgage?

Thanks for your thoughts in advance....
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Old 10-22-2010, 04:36 AM   #2
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The other side of the coin is deflation.

Good luck predicting interest rates.

I do not consider my home and/or (my mortgage which I paid off early) as an investment decision. Homes are really an expense and it depreciates (unless your continuously put money back in it)... It is a roof over one's head... But it is also Home, why risk it hoping to make a small spread?


Sorry for the scornful response... but you asked.

Want an opinion... here it is - This is type of logic is one step above hoping to make spread on a credit card.

Don't get me wrong.... there can be many legitimate reasons to not pay off the mortgage early... but this is not one that would drive my decision.
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Old 10-22-2010, 06:00 AM   #3
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I think it's best to pay off the mortgage unless you can invest the money elsewhere and make more than the tax adjusted cost of the mortgage. Then again, paying off the mortgage is a 100% certain gain while investing elsewhere involves some degree of risk.
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Old 10-22-2010, 06:03 AM   #4
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2 cents:
IMO inflation itself is meaningless for your financing:
You have already purchased the house, so price increase by inflation will not bite you. You have already financed, so for the fixed period interest increase will not bite you.

Only if you assume that the future price increase for cost of living will lead to a salary increase the inflation will benefit your mortgage. If you spend now 20% of your income for mortgage then it might be 18% of your salary. But this does not mean you save anything.

Do you have investment opportunities that provide better and safer returns than eliminating your current interest rate? Then I would use these. If not, I would pay back mortgage.
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Old 10-22-2010, 09:38 AM   #5
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Keep the mortgage. It is denominated in a fixed number of dollars with a fixed service. Our CPI and interest rates have apparently not yet received the news on the dollar, but the forex market has.

On Forex markets, the former buck is now the mini-buck, tomorrow the micro-buck, and not far into the future the nano-buck.

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Old 10-22-2010, 11:16 AM   #6
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Quote:
Originally Posted by REattempt View Post
Old Debate, New Spin...
With the likelyhood of inflation, doesn't it make sense to keep the mortgage?
You just think that it's a new spin.

Inflation is only one of the issues affecting a mortgage payoff decision. Read the FAQ Archives...
(FAQ archive) Should I pay off the mortgage or invest the money?
... and particularly the first few posts of this thread:
Covering a mortgage without losing your ass(ets).
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Old 10-22-2010, 11:22 AM   #7
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What makes you say there is a likelihood of inflation? It's going down. In fact, the risk at this point is deflation. I've read where some think the US economy is going the way of 1990s Japan. And they are still in a deflationary rut.

Quote:
Originally Posted by REattempt View Post
Ok, apologies for raising an old debate, but...

Thinking about paying off my mortgage.

With the likelyhood of inflation, doesn't it make sense to keep the mortgage?

Thanks for your thoughts in advance....
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Old 10-22-2010, 11:26 AM   #8
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Commodity price levels are closely linked with inflation and they have almost all moved significantly higher. Alliance Bernstein is predicting inflation in the 3 to 3.5% range within 18 months.
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Old 10-22-2010, 11:26 AM   #9
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Assuming that your challenge is not just rhetorical, I am sure you can think of many reasons why inflation may come roaring back. For one, they may decide (or be forced) to measure it accurately.

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Old 10-22-2010, 11:33 AM   #10
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some are saying the fed will try to create inflation because it fears the economy is faltering, but there is no guarantee it will work. Japan tried and failed several times.
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Old 10-22-2010, 11:53 AM   #11
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There's also an awful lot of cash still sitting on the sidelines that could be unleashed given a return to confidence. Put all that to work and it could be another factor pushing inflation higher.
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