Do you consider your mortgage "debt" - Page 2 - Calgarypuck Forums - The Unofficial Calgary Flames Fan Community

Travis Munroe · 08-30-2011, 01:08 PM

Can a mod edit the poll lol.....pretty lopsided.

Rhettzky · 08-30-2011, 01:09 PM

Well by definition I believe it's a debt. But when I'm figuring out my financial situation and trying to balance our budget at home, I don't typically include the entire mortgage debt. I include the individual weekly payments instead of using the whole sum of the debt like I do with our line of credit or credit cards. Kinda splitting hairs I suppose.

kermitology · 08-30-2011, 01:09 PM

Quote:

Originally Posted by Hesla

It is debt that you have in order to make a investment purchase (ie. the house). So yes, but it definitely is in a different class than just a straight out Line of Credit.

My thoughts exactly.

I'm in the midst of building a home in Renfrew that should end up being worth more if I sold it right away than I put into it in the first place.

fundmark19 · 08-30-2011, 01:10 PM

I know its debt but I try to pretend its not debt since it really hurts to say I am a million dollars in debt. But I do considered being debt free to not have any payments on my primary residence and no other debt. I am such a hypocrite!

Rathji · 08-30-2011, 01:11 PM

It is debt, but it is debt that is secured to an asset that in the long run will probably not depreciate.

In that way, unless you are under water on your mortgage, the fact that you have it is likely increasing your net worth - because it allows you to own your home, which you have equity in.

So it is debt, but it is likely that it is much better debt than a credit card or normal line of credit.

Ashartus · 08-30-2011, 01:15 PM

I consider my mortgage to be a debt, but I don't think of myself as "in debt" because my assets far exceed my debts.

Devil's Rule · 08-30-2011, 01:19 PM

Some good points in this thread. I am of the opinion that debt of any kind is bad and avoid it if you can, but that is just me.

Also are mortgages the only type of vehicle to finance a home? Nope, but you do need to have an X amount of pesos in order to by-pass mortgages, like many wealthy people do.

Quote:

Originally Posted by wookster

Its definitely debt...but I would call a mortgage "good debt"...

This is debatable...what if you bought a house in the US at it's peak, you would have a serious underwater mortgage situation, which is bad even after you have paid off the mortgage is many years of living there, the house may not be worth as much as you have paid for it + interest.

chemgear · 08-30-2011, 01:20 PM

^ Yeah, I think it kinda makes the underlying assumption that prices will always increase. I wonder how Americans would answer this as well given the drop in prices there.

Mike F used track house sales in Calgary and their previous sales prices/history. The last few times I looked, about 35-45% of recent mls sales resulted in a lose of equity versus their original purchasing price (after standard mls fees.) But that of course, is a sidebar.

MarchHare · 08-30-2011, 01:22 PM

Of course a mortgage is debt, but it's not in the same category as consumer debt. My wife and I owe about $200k on our mortgage, but we have $0 in consumer debt, so we consider ourselves to be in pretty good financial shape. On the other hand, if we had foolishly racked up a $200k credit card bill, I'd seriously be contemplating bankruptcy.

VladtheImpaler · 08-30-2011, 01:22 PM

Quote:

Originally Posted by mikey_the_redneck

I think of a mortgage as a form of usury.

That's why you can only get a mortgage from Jews. All the Christian banks abide by the Bible...

Coach · 08-30-2011, 01:26 PM

Its an interesting question, because without a doubt it is a debt that you're paying off. But you (in theory) come out ahead in the end. It certainly feels like debt right now haha.

GP_Matt · 08-30-2011, 01:28 PM

I don't the reason for owing money is very important. If I have a million dollar house and owe 300 k on an LOC I don't think it matters whether that owed money was spent on the house or a one time cocaine binge, you still owe the money. The more important question should look at cash flow and net worth. Debt isn't inherently bad, but it can have bad terms. If I decide to go into debt rather than liquidate an asset that is a decision where I have weighed the costs of each and decided it was the better move.

bizaro86 · 08-30-2011, 01:29 PM

Quote:

Originally Posted by VladtheImpaler

That's why you can only get a mortgage from Jews. All the Christian banks abide by the Bible...

Or you could find a Islamic Finance company. They don't charge interest at all. (Some sort of joint venture structure or sale/buyback, typically)

http://en.wikipedia.org/wiki/Islamic_banking

Phanuthier · 08-30-2011, 01:30 PM

Quote:

Originally Posted by Realtor 1

Can a mod edit the poll lol.....pretty lopsided.

Its lopsided, because it is a debt. If you have car payments, do you consider yourself in debt? Student loans? If you want to say "oh, uh, a mortgage isn't a debt because in the future it pays off" then a student loan isn't a debt either.

Or, what if you took out car payments (even if you didn't have to) because you used the money to put into investments? Then its not a debt, cause its making you money... right?

Travis Munroe · 08-30-2011, 01:32 PM

Quote:

Originally Posted by Phanuthier

Its lopsided, because it is a debt. If you have car payments, do you consider yourself in debt? Student loans? If you want to say "oh, uh, a mortgage isn't a debt because in the future it pays off" then a student loan isn't a debt either.

Or, what if you took out car payments (even if you didn't have to) because you used the money to put into investments? Then its not a debt, cause its making you money... right?

Comparing a student loan with a mortgage could not be any worse of a example in terms of debt.

bizaro86 · 08-30-2011, 01:33 PM

Quote:

Originally Posted by Phanuthier

Its lopsided, because it is a debt. If you have car payments, do you consider yourself in debt? Student loans? If you want to say "oh, uh, a mortgage isn't a debt because in the future it pays off" then a student loan isn't a debt either.

Or, what if you took out car payments (even if you didn't have to) because you used the money to put into investments? Then its not a debt, cause its making you money... right?

For sure. A one word change to the poll, "Do you consider your mortgage "good debt" would likely have produced a very different answer.

A mortgage used to buy a house (appreciating with inflation on average) is better debt than a loan used to buy a new stereo (depreciating on average).

morgin · 08-30-2011, 01:33 PM

As corporatejay said, it depends on the size of the mortgage. Yes, a mortgage is a secured debt, but if the value of the security is $1,000,000 and the balance of the mortgage is $200,000.00 you would have debt, but not be in a position of debt. I would not consider someone who has the sort of financial portfolio such that they often borrow money at low interest rates to invest with the expectation of a higher rate of return to be "in debt", notwithstanding their loan is a debt.

Conversely, those of you who have zero equity in your homes and have unsecured consumer debt both have debt and are in debt.

Phanuthier · 08-30-2011, 01:34 PM

Quote:

Originally Posted by Realtor 1

Comparing a student loan with a mortgage could not be any worse of a example in terms of debt.

Really? It couldn't be any worse at all?

troutman · 08-30-2011, 01:35 PM

Quote:

Originally Posted by Realtor 1

I appreciate the opinions without any insults or negativity!
Troutman, you only consider it debt if a payment is missed?

No, I would always consider it a debt. If you don't consider it a debt, try defaulting on payments, and see how long it takes for foreclosure proceedings to begin.

Rathji · 08-30-2011, 01:35 PM

Quote:

Originally Posted by Devil's Rule

Some good points in this thread. I am of the opinion that debt of any kind is bad and avoid it if you can, but that is just me.

Also are mortgages the only type of vehicle to finance a home? Nope, but you do need to have an X amount of pesos in order to by-pass mortgages, like many wealthy people do.

This is debatable...what if you bought a house in the US at it's peak, you would have a serious underwater mortgage situation, which is bad even after you have paid off the mortgage is many years of living there, the house may not be worth as much as you have paid for it + interest.

Of course it wont be worth the money you paid for it if you include interest, especially factoring in inflation.

Just ran a quick calculation on RBC's website. A 5 year term, $300k mortgage at 5% interest over 25 years will cost roughly $600k. (someone correct me if I am wrong), which means you pay twice what your house is worth, not counting the fact that you renew it a few times during that 25 years, and end up paying more in actual dollars, due to inflation.

How much inflation will happen in 25 years? Can't say for sure, but between 1985 and 2010, inflation alone would have turned a $300k home into a $600k home. (source).

So just on those calculations alone, it is pretty much impossible for a house to be worth more in inflation adjusted dollars once the mortgage is paid off. However, you did live in it (or rented it out) for those 25 years, so that is where the benefit comes in.

What do I know though, I am just a tech.