Canadians naive about how long they’ll be in debt

[chemgear]

Not really surprising I guess. But it is nice they finally compare the survey results to their actual financial situations.

You always see articles about how Canadians "are responsible" because X% intend to put a lump sum against their mortgage debt this year. Heck, I also intend to win the lottery this year!


http://www.financialpost.com/persona...061/story.html

The survey showed that people tended to predict they would have all their debt paid off 10 to 15 years from now.


For example, those 18 to 24 picked 32 as the average age for being debt-free, those 25 to 34 said 44, people 35 to 44 said 54, 45- to 55-year-olds said 60, and 55- to 64-year-olds said 65.


Most age groups’ expectations for being debt-free appeared to be unrealistic, given the corresponding data on indebtedness. For example, while those age 25 to 34 picked 44 as when they would be without debt, only 18% of people 45 to 54 in the survey were found to be debt-free.

[nik-]

Couldn't the "Canadians" in this study just be changed to "people" ??

[Ozy_Flame]

Originally Posted by nik-

Couldn't the "Canadians" in this study just be changed to "people" ??

No . . . Americans have no debt, what are you talking about

[Travis Munroe]

Edited for poor use of words lol

[chemgear]

LOL, probably. It's actually worse in Canada than the US though:

http://www.theglobeandmail.com/repor...rticle1835539/

Canadians’ debt-to-income ratio is now higher than Americans’ for the first time in a dozen years, leaving policy makers with a dilemma: Rein in spending and risk hampering the recovery, or do nothing and risk a cascading financial failure.

[Sliver]

Originally Posted by Realtor 1

Definition of debt free to include a mortgage or paid off?

IMO a mortgage is not really debt because chances are it is not losing value.

A mortgage is absolutely debt. Particularly because people often overbuy homes and they also consolidate debt into a mortgage. Debt free means not having any debt of any kind IMO.

[Cowboy89]

Originally Posted by Sliver

A mortgage is absolutely debt. Particularly because people often overbuy homes and they also consolidate debt into a mortgage. Debt free means not having any debt of any kind IMO.

Exactly, tell a Calgary buyer from '07-'08, who bought a house for 5% down. The amount they are underwater is most certainly 'debt.'

[afc wimbledon]

Originally Posted by Realtor 1

Definition of debt free to include a mortgage or paid off?

IMO a mortgage is not really debt because chances are it is not losing value.

Truely spoken like a realtor, bollocks of course but keep drinking the kool aid.

[Tinordi]

Laugh. Green text there realtor?

[Phanuthier]

Originally Posted by Realtor 1

Definition of debt free to include a mortgage or paid off?

IMO a mortgage is not really debt because chances are it is not losing value.

You GOT to be kidding me...

[Rathji]

Of course any debt, by definition is debt, so you can't be debt free until you don't have any debt!

Originally Posted by Cowboy89

Exactly, tell a Calgary buyer from '07-'08, who bought a house for 5% down. The amount they are underwater is most certainly 'debt.'

Everything you owe is debt, but some debt isn't "bad debt".

Clearly if you owe more than it is worth, or have rolled a bunch of other debt into your mortgage, then that is bad debt.

If you simply owe money towards your home, especially if your monthly cost of ownership is lower than your monthly cost of renting would be, then how could it be considered bad debt?

Originally Posted by Phanuthier

You GOT to be kidding me...

Historically, housing costs increase more than they decrease, which means statistically speaking, you are more likely to gain value in your home rather than lose it. How is that confusing? He is not claiming that you are immune to losing value.

[Tinordi]

Only in rare cases is the monthly cost of ownership lower than the cost of renting.

[corporatejay]

Originally Posted by Sliver

A mortgage is absolutely debt. Particularly because people often overbuy homes and they also consolidate debt into a mortgage. Debt free means not having any debt of any kind IMO.

I think that's being overly simplistic. Someone who owns $1,000,000 home but only has a $200,000 mortgage isn't "in debt", they have a debt, but their assets significantly outweigh their liabilities.

[bizaro86]

Originally Posted by chemgear

For example, those 18 to 24 picked 32 as the average age for being debt-free, those 25 to 34 said 44, people 35 to 44 said 54, 45- to 55-year-olds said 60, and 55- to 64-year-olds said 65.

I bet a mortgage is part of the reason for the change. Many people 18-24 haven't bought a house/condo, so they figure by 32 they'll have their student loans/car loans paid off.

Then they buy a property in their mid/late 20s, and figure they can pay it of in 15 years. Then they don't do that, and by the end of the mortgage amortization they figure out that it actually will take the full 25,30,35 or 40 years to pay it off.

[bizaro86]

Originally Posted by Tinordi

Only in rare cases is the monthly cost of ownership lower than the cost of renting.

True. But most of the time the difference is approximately the monthly principal payments on the mortgage, which many/most people don't have the discipline to save if they rent.

The studies on renting and investing the difference generally come up with that being a good idea financially. On the other hand, renting and spending the difference on beer and trips to Vegas is probably not such a good idea financially. And most people are more likely to do that than invest it.

[bubbsy]

if we consider mortgage debt to be included, i think the avg person will only be debt free ~55. buy a home (not the condo you intend to live in during your 20s) at 30-35, with an amortization of 25 years. Maybe some inheretance, etc, can help reduce that, but i think 55'ish is about right.

[Ozy_Flame]

Bad debt versus good debt. That's the difference.

Unless you have a real collectors item, a car is bad debt. Credit cards are bad debt.

Hell, suckers like me who bought our houses in 2007 should be looking at the mortgage as bad debt, but land is never a bad thing to own.

[Rathji]

Originally Posted by Tinordi

Only in rare cases is the monthly cost of ownership lower than the cost of renting.

Not even in situations like this?

Originally Posted by corporatejay

I think that's being overly simplistic. Someone who owns $1,000,000 home but only has a $200,000 mortgage isn't "in debt", they have a debt, but their assets significantly outweigh their liabilities.

[tvp2003]

I'm sure most people can agree that having $200k in mortgage debt is a lot different than $200k in consumer (i.e. credit card) debt.

[Phanuthier]

Originally Posted by Rathji

Not even in situations like this?

If your house inflated that much... and you think you're sitting on a $1,000,000 asset (with $200k liability)... you should probably sell your house ASAP.