Inflation And Your Mortgage

By Mike Swanson

When we hear the word inflation we often feel it is a bad thing. The very hearing of the word can make us shudder. Inflation can mean that we pay more at the pump and more at the grocery store than we paid last month and scare the stock market beginners. The truth of the matter is, however, inflation may not always be bad. In fact, we depend on inflation for our properties to grow in value.

Here is an example of how inflation can be a good thing.

Rob and Mary bought a little house in 1991 for fifty eight thousand dollars. Their payments, including taxes and insurance were four hundred forty dollars each month.

In 2005, the value of their home had increased two hundred nine thousand dollars. Their payments have also increased due to an increase in the homes assessed value and insurance rates. Their total payment in 2005 is five hundred and forty dollars.

In this case, inflation has been helpful to Rob and Mary. Their home is now worth more than when they bought it and the home payment has not made a significant increase.

Recently, Rob and Mary had their home reappraised. Due to the economic conditions in the United State of late the home is now only worth one hundred fifteen thousand dollars. Their house payment remains exactly the same as it was in 2006, but the home has lost almost half of its value form 2006. The lack of inflation has caused Rob and Mary to lose net worth. Unless the economy turns around and we begin to have some inflation once again, their property will continue to lose value.

While none of us want to have runaway inflation which often is very harmful to those on fixed incomes, we all depend on some amount of inflation to keep our economy running smoothly.

What we really desire is to see balanced inflation. The prices of things grow gradually along with our paycheck as well as the value of our property. - 23204

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