Good time to pay off mortgage... or not?

Discussion in 'Economy' started by hbardiamond, Oct 12, 2009.

  1. hbardiamond
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    hbardiamond Rookie

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    I have been trying for the last 3 hours to find an answer to the following question:

    What will happen to regular consumer loan balances, such as a person's mortgage, which has a fixed 30 year interest rate, if the dollar crashes or otherwise at least hyperinflates?

    Such as in Zimbabwe, people were carting around grocery sacks of cash to buy a loaf of bread. Heck, sell a couple loaves of bread any you could pay off a $100,000 mortgage. Would banks allow this or would the government intervene and increase the amount of mortgages owed?

    Would the gov't change our currency to the new world currency and hence change our loan balance accordingly by setting how much we would then owe in the new currency? Anyone have any ideas?

    Would it be good to keep mortgages that have a fixed rate high and wait for the dollar to crash or pay them down? I know that it isn't a good idea to have a vault full of US cash right now, so then would it be better to have a high debt that could easily be cashed out when the dollar crashes? Seems like that is what the US plans to do with our national debt...
     
  2. Mike Mitrosky
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    Mike Mitrosky Member

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    I don't think you can find an answer 100% either way because nobody can predict the future... We could have inflation, deflation, etc.. All depends on what the federal reserve wants to do. I know its not much help.. just my 2 cents
     
  3. hbardiamond
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    hbardiamond Rookie

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    Thank you for the reply. I guess I'm predicting the US will have to print its way out of debt especially if oil starts trading in a new world currency as is being seriously discussed. Nations will start dumping dollars and this will cause further hyperinflation with all those dollars in the marketplace. So assuming hyperinflation (as opposed to the deflation that should have started with the housing bubble burst and bank failures before tarp and the bailouts) would it be a good idea to sell assets to pay off set rate debts or hold assets, wait for the dollar to crash and then pay off mortgages with all the dollars that will be flying around?

    If anyone thinks deflation is still an option let me know why you think that. Because in that case it would definitely be better to sell of assets now and pay off debt.
     
  4. AllieBaba
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    AllieBaba BANNED

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    I think it's worthwhile to pay it off...if you aren't paying off a mortgage that is more than the current value of the house.
     
  5. AllieBaba
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    AllieBaba BANNED

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    If you're paying more for a house than it's worth, and it's eating into your budget, sell the fucker and get into something more reasonable.

    I'm like the last person in the world with sage economic advice to give...but I've been tuning into radio and tv economic shows lately.
     
  6. eagleseven
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    eagleseven Quod Erat Demonstrandum

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    Hyperinflation eliminates both savings and debt, so that holding debt is advantageous during periods of hyperinflation.

    If you seriously think there will be hyperinflation, and are willing to make that gamble, don't make more than minimum payments on that mortgage. But do understand, it is a gamble.
     
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  7. hbardiamond
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    hbardiamond Rookie

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    Thank for the two opposing replies. Those are the two delimmas I'm dealing with. With all the debt Obama and the congress are getting this country into right now in unsustainable amounts does anyone think there is any other way for the US to reduce its debt especially if the dollar is dumped by the oil trade besides hyperinflation? If not maybe that is the plan, coast along until after the 2010 elections and maybe even the 2012 election but then when this false recovery proves itself false and the bills for the new healthcare system start to come due, print the heck out of the dollar and hyperinflate ourselves out of debt... Am I way out there?
     
  8. The Rabbi
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    The Rabbi Diamond Member

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    How do you sell the house if you're upside down in it? You'd have to bring cash to the table. And while that isn't unknown, it is not the norm.
    Who cares what the house is worth today? You aren't speculating in the value of your home. You're living there. If you plan to be there for another 3-5 years at least then it makes sense to stay.
     
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  9. JakeStarkey
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    JakeStarkey Diamond Member Supporting Member

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    Although the economy deflated about 2% in the last year excluding the medical sector's 6% inflation, I am betting on inflation beginning by summer next year. Don't worry about the feds resetting the value of loans to protect banks and mortgage companies ~ any government that tries that will be voted out of office the next election (lock, stock, and politician) and the politicians know that. I do think, though, with the amount of dollars in the system and the very real possibility of oil being tied to the euro rather than the dollar, we will have several years of double-digit inflation. The trick is to protect the dollars you do have. And do wait to pay off the mortgage in ever-inflating dollars. What a deal!
     
    Last edited: Oct 12, 2009
  10. AllieBaba
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    Well, as I said, I'm a personal economic embryo.
     

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