Would you Walk Away from a Mortgage?

The other day I was talking with a friend about how we pay so much each month for our mortgage payment, yet maybe 10% goes towards principal.  It’s frustrating, and often makes me dream of selling my house and being mortgage free.  Of course, then we’d have to pay rent and who knows if that would be better for us.  I told her how I had been paying extra on the principal to reduce the amount of interest we end up paying and to shorten the length of our mortgage.  She had some objections, and I listened to her while taking mental notes.  Here’s what she thought about us paying extra on the mortgage:

-Because we don’t plan on staying in this house forever, she thought it would be in our best interests to stop paying extra on the mortgage and to start putting that money elsewhere.  Maybe a Roth IRA, investments, etc.  Over the long term, she thought it would be better if we invested the money over it being tied up in (maybe) equity in the house.

-There’s not really a way to get the money back that you pay extra on your mortgage unless you take out a home equity loan, and that’s not really something I ever want to do unless it was an emergency.

-Cash is king.  If we take the extra money we’d be putting towards the mortgage in a savings account, we’d have access to that in case of an emergency.

-If our house value ever dropped dramatically and we wanted to walk away from our mortgage, the less money we had into the house, the better.  I don’t know if I could ever walk away from a mortgage, but with the economy roller-coastering like it has been the past few years, who knows what will happen with home values.  I don’t want to be stuck with this house and not be able to move or sell it.

I can understand why people would walk away from a mortgage.  My parents’ house in Michigan was worth at least $240,000 at one point and now is probably worth less than $100,000.  Had they had a mortgage on the house, it probably wouldn’t be worth paying the payments on a house they probably would never recoup the money.  Of course, their house has been paid off for years, so they’re only screwed if they go to sell, which I don’t see them doing in the near future.

Do you think you would ever walk away from a mortgage? What circumstances would cause you to do so?

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Is Hyperinflation Imminent for the U.S.?

If you’ve watched the news lately, there’s been news of inflation.  With as horrible as the economy is, something needs to change for the better.  Personally I don’t think that printing extra money is a good idea, but I’m not an economist, so I may not know what I’m talking about.  I have fears that hyperinflation is going to take place and it scares the pants off me.  I’m worried that if hyperinflation occurs, it will have a domino effect and worse things will happen.  Here are some of my concerns about hyperinflation:

1. Goods will become way too expensive.  Food prices will rise sharply, people will freak out and the grocery stores will be empty.  People will start buying food to hoard because of hyperinflation.  Other goods will cost a lot more money, which will mean that our current salaries will not go as far.

2. The stock market will crash.  After the news of hyperinflation breaks out and is a reality, people will respond by selling all their stocks to get out of the stock market.  After the stock market crash, who knows what will happen.

3. Money in savings will be useless.  Paper money won’t be worth anything.  People will start bartering more for goods and services.  Gold and silver prices will be higher than anyone would have ever imagined.  All that money that you worked hard to save over the fast few years?  Not worth anything any more.

4. Riots will break out as food and water become scarce.  The government will send out the National Guard to try to counteract the riots, but it really won’t help.  People become more angry.

5. Other countries will refuse to help the U.S. and China will stop purchasing bonds and investing in the U.S. economy.

6. Oil will become a lot more expensive, and the countries we get oil from will stop sending us oil.

Of course, these are worst case scenarios and it’s almost like Armageddon.  I’m not sure if hyperinflation will be the Armageddon or not, but I know that it wouldn’t be a good thing for the United States.  I know that one of my biggest concerns is not being able to pay for food or have access to enough food to feed my family.  It’s also disheartening to think that all that money that we’ve saved up will not be worth anything.  That’s a horrible thought!

I’m not an economist, and I try my hardest to stay away from the news.  Things in the country are scaring me right now, and who knows what’s going to happen.  I wish I had a magic wand to just make everything better, but I don’t.  I think I’m just going to keep on living life like I have because the only other alternative is to worry, and that doesn’t help anything.  We’ll keep gardening, living simply, and saving money because that’s what we always do.

What do you think will happen with the United States economy in the near future?  Do you think we heading towards hyperinflation?

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Current Unemployment Rate? 17.5%

sad.jpgSeriously? 17.5% unemployment? Yes, if the government would measure unemployment as they did 80 years ago.  The government’s calculation of 7.2% unemployment does not take into consideration millions of Americans who could not find a job or could not get full time employment.  So, if you’re that person with the master’s degree that’s working part time at your local grocery store, you’re not included in the calculation.  Technically you have a job.

The government also tracks the “U-6” rate, which includes discouraged and underemployed workers.  Right now it’s 13.5%.  Currently we’re at a 15 year high for unemployment.  The number of Americans filing for unemployment is at its highest level in a quarter of a century.

During the Great Depression, unemployment hit 25%.  But that wasn’t until 4 years after the stock market crash.  1 in 4 Americans was out of a job.  We think 7.2% (or 17.5%) is bad?  Hopefully we won’t see 25%.  That would be devastating.   My advice?  If you’ve got a job, thank your lucky stars.  Keep saving all you can, and be as thrifty as possible.  You can never have too much money saved!

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