Inflation and low interest rates – Why you should buy a house with a mortgage now

 

Inflation and low interest rates makes borrowing money a great opportunity

Inflation and low interest rates makes borrowing money a great opportunity

Inflation may occur at the time you most need it. When this happens, it is clever to take advantage of the situation. Buying a house with a mortgage at a time of low rates is of great financial relief since the mortgage debt decreases in value as time progresses due to the inflation.
On the other hand, deflation can be of the exact adverse influence in your debt. When deflation occurs, your dollar value increases. Deflation is due to the reduced flow of money transactions and small day-to-day financial activities. The increase of money or money substitutes, for instance, credit, is a reason for rising prices, therefore, inflation.

Effectively, an increase in money supply dilutes the money stock that already exists and in this way reduces the burden of debt. To explain further, since the value of old money (the money that was lent) is of less value compared to the money it is being repaid in.
You may ask, how does inflation reduce my debt? Well, this happens in multiple ways.

  1. Inflation usually keeps pace with your wages but your monthly mortgage payment remains the same.
  2. Inflation reduces the value of your debt.

Let’s see this now with numbers. For a house that carries a 30 year fixed interest mortgage with an interest rate of 3.25%, the debt becomes easy to pay off in due time. An inflation-induced debt fades off because, at that particular time, you earn more but your mortgage expenditure is still the same. Figuratively, if you initially received an income of $70,000/year, and you are expected to pay a mortgage of $15,000/year, you remain with about $55,000 for normal expenditure. During an inflation period, your income increases slightly above $100,000/year. Here, you commit the usual $15,000 on mortgage and now you have $85,000 for other expenditures and still manage to save the additional $30,000.

We said that inflation reduces the value of your debt but how much? Let’s make some numbers. Let’s assume you buy a house today for $100,000. The average inflation rate is 2.79% (during the last 100 years) so the value of those $100,000 would be just $43,800 in 30 years. Isn’t that amazing?

Inflation, low-interest mortgages and investment properties

Having being enlightened on the great advantage that comes with buying a house with a mortgage, it is wise to make a decision now. But what about buying investment properties?
As we mentioned before, inflation will reduce the monthly payment of your loan and will decrease the value of your debt but now let’s analyse something, even more powerful. The average inflation rate is 2.79% and sometimes we can get a loan for about 3.5% (sometimes even less). What does this mean? Well, it means that we are borrowing money almost for free.

An average rental property in the proper market makes an ROI of 10-12% in cash-flow after paying all the maintenance expenses and the property manager. As I just mentioned, due to the low interest rates and high inflation, we can borrow money almost for free and make 10-12% in cash flow out of it. I think it becomes evident that now, more than ever, we should get a loan and buy rental property. You would be making money every month out of money you got from the bank almost for free and your debt would be destroyed by long-term inflation.

How to Save Money When Selling Property

 

Most homeowners have an awful lot of capital invested in their property. Irrespective of whether it’s a £75,000 flat in a less than desirable locale, or a £5.5 million mansion set in rolling countryside, it probably represents a large portion of your wealth, and you’ll want to make as much money as you can when the time comes to sell it.

One of the best ways to make money is by saving money. The higher your profit margin, the more capital will be left over to boost your bank balance, so this is a goal that every property owner ought to be aiming for. Luckily, we have some great tips to help you…

Choose an Online Estate Agent

A lot of people follow the tried and tested route of engaging a high street estate agent. These enterprises tend to be well known, and this helps to engender trust at a time when it really matters. Unfortunately, it also means that people forget to consider all of their options, and as a result, they often end up spending more than they need to. Online estate agents could be the answer. Although some people are reluctant to give them a chance, lots of them have been around for more than a decade, and have an excellent reputation when it comes to selling property quickly and smoothly. Offering fantastically competitive prices, online estate agents can be the ideal choice for those looking for brilliance on a budget – check out how much you could save in fees using this handy calculator from House Network.

Encourage a Quick Sale

The best way to save money on your sale is to ensure that the turnaround is as fast as possible. The less time you have to engage an estate agent for, the less you’re likely to pay in fees, so your goal should be to close the deal as quickly as you can. There are a number of ways to encourage this: pricing your property realistically, choosing an experienced estate agent, and being flexible in your negotiations foremost among them. 

Shop Around

Thirdly and finally, make sure that you shop around as much as you can. The right team of professionals will help you to achieve a quick, smooth, and stress-free selling experience, but you will have to pay a premium for the best services. The most effective way to ensure that you’re not being charged more than you need to be is by shopping around. From your estate agent to your legal team, never settle for the first option; always source as many quotes as you can for the purposes of comparison. Do your research and you’re guaranteed to reap the rewards.

Save money when selling your property with these great tips and tricks.

Does it Matter What University You Attend?

 

College applications have been sent and you are anxiously waiting for the results.  You have been wanting to go to a prestigious university.  The results come in and you are rejected despite your hard work and success.  This feeling is common to many students as the acceptance rate to the Ivy league ranges from 5 to 14%!  With advances in technology and online platforms such as Open Courseware from MIT, this begs the question whether or not going to a prestigious university is worth the cost and effort to get accepted.

In some aspects, getting an education from a major university can be worth it.  If you are trying to pursue a research career, these universities have adequate funding, faculty, and resources.  The faculty at the university will more likely be a major contributor in their field and more able to help you in their research career.  Besides research careers, pursuing professional degrees such as the MBA can provide major networking opportunities.  Many business and government leaders send their children to prestigious universities.  As a result, you could potentially make connections that will help boost your career and get your foot in the door.

Despite the benefits to business professionals and researchers, in some cases an Ivy league degree may not be worth it at all.  A cost-benefit analysis should be done.  What salary is expected upon graduation?  Would the loans taken out be burdensome upon graduation?  With ever-increasing college-tuition, individuals are expected to pay more and more every year (as much as $40000 per year!).  Though scholarships are given, they may not cover the entire cost or you may not be awarded one.  When you pursue a degree in Engineering and the starting salary out of university ranges from $50000-80000, the loans are not worth the cost.  At 5-6% interest you are looking at years of student loan payments!  Instead if you attend a less prestigious university with the proper accreditation, you get the degree with much less debt.  The debt you acquire attending a prestigious university may not be even worth it.

Depending on your goals, an Ivy league education may not even be worth it.  If your goal is to get a job, this can be accomplished for much less at a state university.  If you are worried about networking, you can do this on your own by calling up and reaching out to people in your industry.  At university, you get out what you put in no matter where you attend.  Instead of being upset at getting rejected, work hard to network with your peers.  Talk to your professors about doing research with them.  Apply to summer internships and co-op programs.  Internships will give you the right experience industry is looking for.  As a result, upon graduation, you will have a job in hand or at the very least some savings as a result of your work.  Attending a university (prestigious or not) does not get you a job.  No matter where you go, YOU make it happen!

Save yourself the hassle of applying and from major student loan debt and think about attending schools outside the Ivy League.  It does not matter where you attend because it is up to YOU to make your own future.