Paying Off Your Mortgage Early Is A Bad Idea When…
September 21, 2009 – 4:32 am…inflation is on the rise. That’s speaking in economical terms. If you have fixed payments and inflation goes through the roof then you’ll be paying your mortgage back with worthless dollars, and therefore you will be ahead.
Economics aside though, I agree with Dave Ramsey’s baby steps as far as the timing of when to start paying down the mortgage faster. I think that paying off your mortgage early should be a primary goal once a full emergency fund is in place and some money is being saved for retirement. I don’t think that saving 15% is accurate for everyone, because a 20 year old saving 15% for retirement is more likely to meet with success than a 60 year old.
Inflation is likely to rise up in the near future though, and the government continues to expand the money supply. The only real question is when? For now the lack of consumer demand and available credit has more than offset the potential rise in inflation. If people continue to lose jobs and scale back we could see deflation for a while before it reverses to inflation.
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One Response to “Paying Off Your Mortgage Early Is A Bad Idea When…”
I hear and read this argument often. It is not universally true. Paying off a mortgage with devalued dollars caused by extended periods of inflation is a benefit only if your income at least keeps pace with inflation. On the other hand, if your mortgage payment remains a fixed percentage of your spendable income even with inflation, what does it matter that those dollars have been devalued by inflation? The relative cost to you and your spending power is the same.
By MJP on Sep 25, 2009