Make no mistake about it, inflation is going to take off in
the coming years. Some feel it will be
moderate, others think we may experience hyperinflation. You can’t print trillions of dollars, pump it
into the economy, and not expect inflation. It’s not a matter of if, it’s when.
Prices don’t go up, our money (dollar) is watered down and the value drops.
So the question is, how do you protect yourself against inflation? As always, there are many differing opinions. One thing is for sure, if you leave your money sitting in the bank or save cash under your mattress you will loose.
Real estate can be a hedge against inflation regardless what happens to prices in the future.
Buying a home that you live in eliminates the need to pay rent. This protects you from periodic rental increases. You also get some tax benefits, which reduces your overall investment. If you have a fixed-rate mortgage, you have stopped the progress of inflation on one of your largest expenses. Your payments, if you stay in your home and don't refinance, will be the same today as it is 15 years from now and beyond. If you stay in your home and pay it off, your inflation rate will drop and you will be living in your home without a monthly payment. (You'll still have to pay taxes, insurance, and other holding costs.)
There is no doubt house prices will recover. Locking in historic low interest rates for the long term is a smart move. Think about, have you ever said to yourself “I remember when gas prices were $1 a gallon?” You can bet in 5-10 years from now you will be saying “I could have bought that house for cheap in 2009 and my payments would have been incredible today!”
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