Features

• When inflation occurs, the value of a unit of currency decreases; as a result, it takes more of that currency to buy a certain product than it did a short time ago. In these circumstances, loans that receive a fixed cash flow devalue greatly.
  
  

Types

• If a homeowner holds a fixed-rate mortgage, he must continue to make regular payments to the lender at a fixed amount. Under hyperinflation, the loan will become almost worthless. However, if the mortgage is an adjustable-rate mortgage, the payment amount will rise in keeping with a financial index, allowing the loan to keep its value.
  
  

History

• When Zimbawe experienced runaway inflation in 2008, many mortgages became all but worthless. Lenders and property holders sought to denominate mortgages in foreign currency to assure their continued value.