Here are 5 Significant Perspectives from Resolve Lending, Inc. concerning the game of compound devaluation of your money.

1. If you buy a home for $200,000 at 4.875% and pay it off in 30 years then the real cost is $234,486 – Yes, this is correct, $234,483

o Purchase price $200,000 + interest paid $181,000 = $381,000 minus -3% inflation compounded negatively over 30 years is $146,516 less. What most people do not think about is your $381,000 is fixed today while the dollars paid in the future are going down at -3% annually. Therefore the combined $381,000 you paid for the loan over 30 years is only $234,483.

o You will be sitting on an asset which will be sold for about $648,000 (real estate at 4% inflation value). When you are comfortably leveraged at these rates you win on both sides of the equation – the devalued dollar and when the asset/home appreciates.

2. On the other hand if you chose to rent and pay $18,000 per year ($1,500 mo) over the same 30 years, you will have paid $900,000 in rent without an asset to sell: $18,000 with +3% compounding rent rates. Living debt free is not necessarily the game we are playing in!

3. When we are leveraged on a fixed rate we are fixing the future dollar amount while the value of this dollar is falling at an annual compounded rate of negative -3%.

4. Since the Civil War the government (or Federal Reserve) has used inflation (more dollars in the system) as their primary tool to control the money supply. *Note: Inflation Targeting: http://www.house.gov/jec/fed.htm

5. Inflation is not linear.  Inflation insidiously works across all financial sectors but over a long period of time, “comfortable fixed leverage” will win.  http://en.wikipedia.org/wiki/Federal_Reserve#Inflation_and_the_economy

It is difficult to remember the game we are in when home values have lost 30% of their value. The only way to counteract the “Fed’s tools of inflation” is to play their game the same way. If you play football you cannot be angry when after 3 hours of playing your heart out in the trenches a skinny mud-less soccer playin’ European skips onto the field and kicks a 5 yarder to win the game (and gets the girls).

It would be great to connect, call/email anytime!

Jeff Turley / 425-519-3665

www.usinflationcalculator.com  Run your own numbers with the first home you or your parents purchased 30 years ago. Ask yourself what you could have rented that home for and put those numbers in (see what the payment would be today).

*I have not included property taxes or maintenance in my equation for the purpose of simplicity. If you chose, run your numbers at 1.5% higher than the current interest rate 6.25%. – Most borrowers with a $200,000 mortgage itemize their tax returns, therefore negating property taxes.