Costa Rica mortgages and the falling US dollar

Maybe an expert opinion is needed here, but I’ll venture a guess. The dollar fell a bit over 4% against the Colon the other day. What some of this means, is that your dollar holdings, SS, and pension funds, are worth that much less than it was last week, when converting to Colones.

The mortgage, if it is in US dollars, should be consistent with dollars, one for one.

If the dollar continues to fall, and the colon is revalued further, this could have a serious impact on your resources.

Your mortgage will not suffer from currency fluctuations if your income is the same currency as your debt. I second (or third) what’s been said so far. As mentioned, this is the most conservative approach for your mortgage.

Using the 4% USD drop the other day against the CRC as an example, the things that will become relatively more expensive for you are the things you buy in colones, which apart from your mortgage, is probably most everything else! Things like gas, food, clothes, etc. All things that you buy with a USD price tag remain the same, like your mortgage, perhaps some utilities like Cable TV, possibly private schools or tourist activities. It’s possible though that these entities like the utility companies, schools and tourism companies will raise their prices so that they are not losing on the USD exchange rate. The bank will not change the terms of your mortgage though.

A far more risky approach would be to have a mortgage in colones with a USD income. You win if the USD becomes more valuable in the future and you lose if it falls. Some Costa Ricans have done the same thing, but with income in colones and USD mortgages. Just as risky, but they have been smiling lately because their payments in terms of colones have been decreasing, in other words their USD payment is costing them fewer colones out of their salary. Your salary or your income is the relative factor.

If your mortgage is from a bank, it’s most likely a fixed rate only for the first few years. Then it becomes variable being tied to most likely the 6-Month LIBOR or the US Prime Rate. Mine is a couple or a few points over the 6-Month LIBOR after 5 years. Which one to take is something to consider, but 5 years is a looooooong ways down the road, so it’s hard to say. Personally, I see having a USD mortgage tied to the 6-Month LIBOR as more conservative (diversified) as it changes according to state of an economy in another country, England.

As a sidebar to this topic, and as an observation of what is happening in the US, there is something realistically troubling about the dollar’s decline. As we’ve seen it already against the Euro, any US citizen wishing to retire to, or those that have retired in Europe, are getting hammered if their income is tied to Social Security, US dollar annuities or pensions. Having already lost any financial advantage in European retirement, we now see Costa Rica being put in a similar position. How much further will the dollar slide? I won’t even guess, but if you are a Baby Boomer, this has to be of some concern.

The question I have is, are they trying to keep us from leaving? With the massive amount of people retiring in the next ten years, that might be considering relocating outside of the US, are they worried the economy might take a hit with all those retirement dollars being spent in other places? Not being a big conspiracy theory believer, I still have to wonder what is really going on.

The “Amero” has been bandied about for a while now. Ever since the meeting in Crawford Texas between Bush, Fox and Martin, rumors have abounded. It is the darling of the elitists, and a way to have two smaller economies tied into what is still 29% of the world’s GDP, the USA economy. Even though other markets are growing more rapidly, will the transition ever come to pass?

The American people, and by this I mean US citizens, though we are all Americans if born in north or south America, are a fiercely independent group. We have always been. Whether liberal or conservative, we are individualists. If anyone thinks we will surrender our sovereignty to a union cooked up by politicians, they have another guess coming. As we discussed in an earlier thread, where is the revolution? This would be a defining and compelling situation to bring a revolution about. We once fought for independence, and what makes anyone think it could not happen again if this union tries to be enacted. Free trade agreements are one thing, loss of sovereignty and control over our own monetary and economic system is another.

While on the surface, there would seem to be a sensible argument, whereby a larger economic system would bring about parity with the Euro and other currencies, in the deeper sense, we would be absorbing countries with smaller economies and have to bail their troubled systems out. Much like the EU doesn’t want Turkey in their union. Unless the US falls into such a state where we are broken enough to be equal to the GDP of Mexico, we will not do it. I don’t think we will stand for a lowering of our living standards to “third-worldism” without a fight. And that is exactly what would happen with a unified currency.

Having said all the above, the stage is almost set for lawmakers to attempt the implementation of this unified currency plan. A falling dollar, lousy real estate market, unstable equities markets, rising cost of living, loss of jobs, diminishing manufacturing capabilities, and the inability to secure our own borders, will give rise to telling the American people this is our only hope. Trade agreements, with NAFTA and CAFTA being at the forefront, would make transition to the Amero system that much easier. All the elements are falling into place, but will we really go for it?

Only economies having a lower standard of living will rejoice at the prospect of having “Big Brother” come to their assistance. If the US manages to squander everything we once had, we may look for help as well. Until such time, I doubt it. I don’t think we will go down the tubes without a major battle. We will wake up before it is too late, get up off our lazy collective as**es and rise to the occasion, throw out the bums in office, and produce, like we have always done in the past. We have survived depression, recessions, wars, epidemics and a whole host of other miseries, but we are still here. We will not go quietly into the night! It’s just not in our makeup to do that.

What makes you think that Canada would want to tie it’s ship to the US?

I can’t think of any good reasons.

Alberto

Sprite, It looks like you are in the “all is lost” camp. We both have differing opinions of how this will turn out. One of us will be right, and the other wrong. Even though most times we all would like to be right, this time I really hope I am. I’m still going to be here a lot longer than you before retirement. I would at least like to try to make a last ditch effort to help turn things around.

Your assessment may be closer to the truth than mine, still, there is a reason to make a stand for what is left of our country. My question to you is, what if Costa Rica signs on to the Amero one day, are you going to relocate again? See, this is the problem, if we keep running away from a bad situation, we may ultimately find ourselves backed into another corner. By then we’ll most probably be dead, but we can’t keep letting it go down the drain because we won’t be here. If you have children or any other younger relatives, it has to figure into the equation.

Alfred, I am not running from a possible currency change. As I said, this is a done deal and Costa Rica, along with the rest of this hemisphere and the world, is going to be subject to all the ramifications. Like climate change, this is an evolution, for better or worse, and there is little you or I or millions of others will do about it now which will have much effect.

We will all have to get acclimated to some pretty draconian changes coming soon and I am betting that being in Costa Rica will be easier than trying to get by in the States. The States are going to see the most dramatic changes. I just don’t have that youthful enthusiasm for civic volunteerism I used to and it is depressingly clear to me that we each have to take care of ourselves now. Good luck, though,in your efforts.