Mortgages — pay them off early, or hold until term? Experts have their opinions, but don’t be fooled by their articles. The authors for mainstream financial websites always leave out a single, but vital, piece of information:
If you expect rising inflation over time (and you should as long as central banks still control the money supply), you can almost read their articles as if they were secret messages awaiting to be decoded to unlock their true meaning. To do that, you should swap the headings: change the “PROS” to the “CONS” and vice versa.
Let’s look at this example article from Fox News that offers mortgage advice. This is what is offered as a “CON” for holding on to your mortgage until it comes to term:
The most obvious, of course, is that you must shoulder the financial burden for longer, which means that you’ll pay more in interest overall. You’ll also gain equity in your house at a much slower rate, which could potentially disqualify you from acquiring a reverse mortgage or similar loans.
This advice is true — for a non-inflationary, stable-money economy.
We do not live in one of those.
We live in an inflationary economy, where all central banks (such as the Federal Reserve System) are in a rush to the bottom: who can debase their currency the fastest by inflating their monetary base the most.
When you lock in a fixed-rate mortgage, as price inflation takes off prices will rise in every area of your life, except one: your monthly mortgage expense. You will continue to receive raises at your job. Even though food, gas, and entertainment costs will all rise, the one that won’t is your mortgage payment: your housing expense will gradually become less and less a burden to you.
LIGHTEN YOUR LOAD, GET PAID TO HAVE A MORTGAGE
The financial burden of your mortgage will become a less and less heavy burden to shoulder over time. In fact, you’re really getting paid to hold your mortgage.
Broadly speaking, if your mortgage rate is 4%, and the inflation rate is 6%, you’re making 2%.
And that’s before you factor in the tax break you receive for paying mortgage interest. Counting that, the picture becomes even rosier.
Furthermore, rising interest rates make housing more expensive, just like anything else. That means that someone who could purchase your exact house will have to do so at a higher interest rate — they’ll pay more each month for the same amount of house. If they wanted to buy a house and make the same payment you will be making when interest rates rise above those of today, they’ll have to buy a smaller house to do so.
HOW YOUR HARD-EARNED MONEY IS STOLEN FROM YOU
Inflation is theft — hidden taxation without representation. On the big scale of things, it transfers wealth from the creditors (those who lend money) to the debtors (those who borrow money).
Nationally, this generally means that the biggest banks are given access to all the wealth of the nation’s hard-working citizens so that they can cover their bad bets (and mounting debts). The big banks have an agent who represents them. This agent of theirs facilitates this wealth transfer. It is called “The Federal Reserve System” in America. It is just a central bank like any other. We saw this wealth transfer take place when the Fed “backstopped” the losing bets of the biggest banks with the banking bailouts of 2008.
But on the individual level, it can also work for you. As a debtor with a remaining principal balance on your mortgage, wealth is being transferred *to* you because inflation effectively erodes the remaining principal that you owe. Those who control the central bank’s engine of wealth distribution — the big banks first, the politicians second — typically intend to take away your wealth to pay off their debts.
This process of using your money to pay their debts is made visible to you, the individual consumer, when price inflation is ignited and we see higher prices in all sectors of the economy.
INFLATION AS A NATIONAL POLICY VIOLATES GOD’S COMMANDMENTS
Obeying God’s law results in conditions that give rise to a free-market economy: no stealing, no lying. This leads to reliable contracts between business partners. Each party knows what to expect from the other. This creates stability. This makes it easier for entrepreneurs and consumers like you and me to predict the future.
This also means a system of honest money:
A false balance is an abomination to the Lord, but a just weight is his delight. (Proverbs 11:1)
A nation who follows God’s laws is promised His blessing. God favors those who are future-oriented: we can delay instant gratitude today for higher income in the future. That means saving. For example, from Deuteronomy 28:
The Lord will open to you his good treasury, the heavens, to give the rain to your land in its season and to bless all the work of your hands. And you shall lend to many nations, but you shall not borrow. (Deuteronomy 28:12)
In order to lend money to others you have to have money saved up that’s available for lending.
Conversely, those nations who break God’s covenant and stray from his commands will be subject to His curses:
The sojourner who is among you shall rise higher and higher above you, and you shall come down lower and lower. He shall lend to you, and you shall not lend to him. He shall be the head, and you shall be the tail. (Deuteronomy 28:43-44)
We are nationally guilty of spending our way into consumer debt. It is the worst-kind of debt: very short term. It puts us in bondage to Satan. He wants us to keep our minds in the present and forget about the future.
In the Garden, Adam bought in to this line of thinking. Instead of working in the garden to gain knowledge about good and evil progressively, gradually, as they worked out their salvation in fear in trembling, Adam and Eve decided to jump the gun and reach for instant gratification.
As one of the most indebted nations in the world, we are nationally, visibly bearing the negative sanctions (being in debt to others) of breaking God’s covenant.
SHIELD YOURSELF FROM LOOMING ECONOMIC INSTABILITY
As voters, we have adopted national policies of economics and government founded upon lying and stealing. We have put unscrupulous, immoral people in office to represent us before God.
An inflationary economy reverses God’s order: it rewards spenders and punishes savers. God is slow to anger, but He doesn’t allow this kind of evil to gain a foothold in history but for short periods of time:
You shall not bow down to them or serve them, for I the Lord your God am a jealous God, visiting the iniquity of the fathers on the children to the third and the fourth generation of those who hate me, but showing steadfast love to thousands of those who love me and keep my commandments. Exodus 20:5-6
As individuals, there are some ways that we can protect ourselves from looming judgments if we recognize and understand the problem.
A fixed-rate, low-interest mortgage is one of the most accessible ways regular Americans can protect themselves from the daily effects of wealth-stealing bureaucrats who operate the levers of the engine of inflation: the Federal Reserve System.
Many Americans have been the beneficiaries of this “dollar-hedge” since the 1970’s without even knowing what they were doing.
A fixed-rate mortgage can help you to preserve your capital and replace that which is lost in the events leading up to The Great Default.
The best way to take advantage of this is through income-generating rental properties. (Use John Schaub’s methods.)
But be warned: at some point this process reverses. You’ll want to have paid off your mortgage debt before then — just look at the housing boom-bust for a recent example of what happens when the boom-process reverses.
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