Biggest reason why I started paying an extra 1k for housing per month… In 5 years, my crappy “luxury” apartment will cost more per month than my house. In 10 years, people will think it’s insane how cheap my house is per month.
Or the country could collapse and my property will be worthless, but at that point I got bigger problems.
You are better off regardless of how much your interest rate is, as long as it is fixed. If your mortgage payments are fixed, but your pay increases with inflation, your real monthly mortgage payment goes down over time.
Eg, if your mortgage is $1000/mo, but at the end of this year a cheeseburger costs $1000, then your mortgage payment is the same cost as a cheeseburger. Doesn’t matter if the interest rate you got originally was 1% or 99%.
What does that mean? Where I live you borrow a certain amount of money and you pay it back plus interest (in my case 3.5%), and that percentage is fixed for 20 years. In 20 years I expect to have paid most of that entire amount back and my house should be mortgage free
Yeah. He borrowed money for a house at 1.5%. Then inflation hit almost 10 during covid and our salary didn’t fully cover this but was raised way more than 1.5%. Money lost value much faster than his debt increased, so the banks effectively lose money on him while his paycheck grows faster than his debt increases.
If your interest is less than inflation.
Like my colleague who bought a house for about 1.5% before inflation nearly went to 10. Man.
Biggest reason why I started paying an extra 1k for housing per month… In 5 years, my crappy “luxury” apartment will cost more per month than my house. In 10 years, people will think it’s insane how cheap my house is per month.
Or the country could collapse and my property will be worthless, but at that point I got bigger problems.
You are better off regardless of how much your interest rate is, as long as it is fixed. If your mortgage payments are fixed, but your pay increases with inflation, your real monthly mortgage payment goes down over time.
Eg, if your mortgage is $1000/mo, but at the end of this year a cheeseburger costs $1000, then your mortgage payment is the same cost as a cheeseburger. Doesn’t matter if the interest rate you got originally was 1% or 99%.
That if is doing so much heavy lifting it just qualified for the Olympics. The problem with inflation is that your wages don’t keep up with it.
Inflation reduces the real buying power of the money used to repay the loan by the inflation rate each year, regardless of your loan interest.
In absolute terms, inflation is better the higher your interest rate is, because the number of dollars it saves you goes up.
What does that mean? Where I live you borrow a certain amount of money and you pay it back plus interest (in my case 3.5%), and that percentage is fixed for 20 years. In 20 years I expect to have paid most of that entire amount back and my house should be mortgage free
Yeah. He borrowed money for a house at 1.5%. Then inflation hit almost 10 during covid and our salary didn’t fully cover this but was raised way more than 1.5%. Money lost value much faster than his debt increased, so the banks effectively lose money on him while his paycheck grows faster than his debt increases.