San Diego homeowners often think of their mortgage as a monthly payment and little more.
But it has a hidden financial benefit if inflation, which has been dormant for many years, starts to awaken and consumer prices start to climb across the board. The value of real estate tends to move up with the rising tide of inflation. And that's when owners of San Diego homes and condominiums could find that they are doubly protected by their mortgage - especially if it has a fixed rate. The payments remain the same even as inflationary forces drive up interest rates. This means you repay the loan with dollars that are worth less.
Holders of adjustable-rate mortgages won't reap the same benefits because their interests rates would likely be adjusted upward. Still, with today's sharper focus on consumer protection, there typically are limits on how much and how fast those rates can rise.
The Consumer Price Index, which is a measure of inflation, continues to be under control. But the most common mortgages cover 30 years, and it is valuable to know that as that debt shrinks over time, it also serves as a potential hedge again the long-term economic cycles that could bring inflation, push up interest rates and drive San Diego home prices.
-- Chuck Buxton
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