how much debt do you have? - Page 5 - Mothering Forums
View Poll Results: how much debt do you have?
none! 113 26.65%
$1-$5,000 46 10.85%
$5,000- $15,000 77 18.16%
$15,000- $50,000 114 26.89%
$50,000 to $150,000 48 11.32%
$150,000 + 26 6.13%
Voters: 424. You may not vote on this poll

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#121 of 139 Old 04-30-2009, 09:48 AM
 
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I see our home as an investment only in the sense that in 15 years we will have no mortgage (except tax + ins) and no rent but a place to live. We can then sell it and downsize once our kids are out of the house. Sure some people got lucky and bought/sold at the right times and made a killing, but those days are over unless you buy a property in terrible shape and fix it up.
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#122 of 139 Old 04-30-2009, 10:02 AM
 
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We have no debt (including mortgage). I'm 28 and my husband is 30.
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#123 of 139 Old 04-30-2009, 12:00 PM
 
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Well, I guess I can see both sides of including the mortgage as debt, but I tend to think it should not.

If I own a house, and can make the payments easily, but owe on the mortgage, I'm in debt, right?

But what if I had the exact same financial situation with all other things but instead of owning I rented? Would I not be in debt then?

I think rents and mortgage have to be looked at the same way. Except that owning counts as an asset, and offsets the debt. So, that's a plus.

I mean if you are really going to get down to the nitty gritty of it, and compare apples to apples would you count the balance you owe on your lease if you rent as debt? As in if you have a 12 month lease and you have paid only two monthly payments, do you count 10 months of it as debt?

No, probably not.

So if you have a 30 year mortgage and you're say 3 years into it, why count the 27 years left as debt?

See what I mean?

We have to compare apples to apples.

That said, I also don't think it's wise to look at housing as a major investment (anymore). I think renting or owning should be neutral and not really counted.

Consumer debt should be counted. Student loan debt should be counted. Other loans and payments you owe, etc.

No one is counting their electric bill right unless they owe past payments. But you'll likely keep paying that monthly for the rest of your life...same for rent or mortgage.

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#124 of 139 Old 04-30-2009, 12:51 PM
 
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Originally Posted by PrettyBird View Post
We have a mortgage and I have a student loan. Both are very manageable payments and low interest but I still don't consider them "good debt" and I am not sure why people don't count these two things as debt.
I would consider a student loan as debt in this situation. People consider student loans to be "good debt" because the initial expense is generally less than the return (increased income). For example, let's say a farmer offered you the option in March of giving $100 and then in April, May, June, July, August he would give you $50 worth of fresh food (total of $250). You, meanwhile, have to borrow that money and end up paying the bank $30 in April, May, June, July & August (total of $150). You could still consider that a "good debt" because the investment is actually giving you more than you have to put in.

A mortgage is "good debt" in the same way. People expect to get more money out of the home when they sell then if they had invested the difference between rent and their mortgage. Now, I am one person who doesn't count my mortgage as debt. That is because my home value is well over twice what I owe on it. Now, if unemployment was suddenly like 50% I couldn't sell it. But if we desperately needed OUT of this house immediately I could sell it for the price of the mortgage by the end of the day. We live in a good area and comparable homes are over twice as much money---someone would be willing to take the risk that there is a major problem with the house to get in for what would be much, much less than comparable rent. Additionally, if your mortgage is the same price or less than you would pay for rent, it doesn't really make sense from a comparison basis to count the mortgage. It overinflates the home owners debts. A renter in my situation would show $0 in debt (but if they rented the same house, last I knew about $2400/monthly in rent) where I as an owner would show $170K in debt (but a monthly housing bill of $2200). Do you actually consider the renter to be $170K ahead of the owner financially? What if you go to an extreme--- a person with a $10million dollar home and a $100K mortgage. Do they "really" owe more than someone who rents and has $90K of credit card debt?

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Originally Posted by PlayaMama View Post
it's also interesting to see the range of debt amounts and income amounts and i hadn't thought of it as age related but that does matter. i guess i need a three-dimensional graph for the poll so i can include other factors.
I think a graph of debt relative to income would also be informative. Someone with $150K of debt but $300K of yearly income is in a lot different position than someone with $50K of debt and a yearly income of $25K, kwim?

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Originally Posted by Ruthiegirl View Post
I don't really get the 'house as investment' either. I have a mortgage for 179,000 to be paid over 30 years at 5.875%. When I look at the numbers, I will pay over $202,000 in interest over the 30 years. Yes, I can pay it down faster (and we do), but assuming I use all 30 years to pay off I will have spent well over $380,000.

I then add in the many thousands that my house costs me in maintenance and I just don't see where I am ahead. I may make some money, but it doesn't seem like a huge return on my investment.

Am I missing something? If I put $1000 into an account at 3% for the next 30 years, I would end up with $588,000.00. I would be money ahead skipping buying a house. Of course, I would still need a roof over my head, so the comparison isn't realistic, but it shows me that my house is my home first and ranks low as an investment.
This is just how we look at it. Each month we pay $x for our mortage payment. If we rented we would pay $y instead. So with $x - $y = $z, $z would be what I considered my monthly investment. You can then figure your rate of return on $z.

Quick example (with pretend numbers)

You bought a house for $300K. You put down 20% ($60K). Over several years you pay $200K in mortgage payments. Meanwhile the house rises in value to $450K and you *would* have paid $150K in rent payments. Your mortgage payoff value has also dropped to $150K.

So, amount paid as *investment* in home= Amt paid - Rental cost
= down payment + mortgage payments - rental
= 60K + 200K - 150K
= 110K

Value of home = Sale price - current mortgage
= 450K - 150K
= 300K

You have "invested" $110K and "recieved" $300K. Is it a good investment? Depends on how many years it took and what other investments you had available at the time.

Now, if you live in your house for a long time, or in certain markets, $y may actually be *more* than $x. Like right now to rent our house would be about $2400 but to own it is $2200. If we rented this same house (which we wouldn't we would live in a smaller place if we rented, but if we did) we would have LESS money for investing than if we owned.

You mentioned a "huge" return on your investment. It may not be. Not all returns are huge. You usually sacrifice returns the more secure your investment is. And long term, owning a home has been one of the more secure investments. It's not really fair to compare the returns on a home to the return on an amazing stock. Very few people who take out a 30 year mortgage will end up with nothing at the end, but with with individual stocks you could get a huge return or you could loose everything.

Here is a calculator to play with:
RENT vs. OWN Calculator
http://www.vlender.com/cgi-bin/calc/rent_vs_buy.cgi

If anything, I think that calculator underestimates the advantage of buying. It uses the *average* difference between mortgage and renting to calculate the investment. In reality, the amount would start small and grow. The largest amount, therefore, would have the smallest time to grow.

Quote:
Originally Posted by PrettyBird View Post
I see our home as an investment only in the sense that in 15 years we will have no mortgage (except tax + ins) and no rent but a place to live. We can then sell it and downsize once our kids are out of the house. Sure some people got lucky and bought/sold at the right times and made a killing, but those days are over unless you buy a property in terrible shape and fix it up.
This is also how we view it. The end of our mortgage will also (hopefully) cooincide with DS starting college. So, when we have two kids in college at the same time we will suddenly have "extra" money. Then we can stay in this house until they are graduated and devote the money that would be going to rent (had we not bought) to tuition instead.

 

 

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#125 of 139 Old 04-30-2009, 07:30 PM
 
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Wow, I think I put everyone to sleep with my answer.

 

 

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#126 of 139 Old 04-30-2009, 07:33 PM
 
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Originally Posted by grahamsmom98 View Post
Both of us were raised with the ideal "if you can't pay for it, either now or at the end of the month, don't buy it" (this did not include a house ).
Same ideal here for both me and mine. With the exception of my student loan, which is very manageable, we have zero debt. We live well within our means, and buy nearly everything outright. When we do use the credit card, it's usually for travel-related things (for insurance purposes), and we pay the bill in full each month.
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#127 of 139 Old 04-30-2009, 09:16 PM
 
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I don't view my mortgage as a huge liability because we've been in the house for several years. Our house is still worth about 80% more than what we paid for it. We would pay more to rent a two bedroom apartment than we pay monthly on our four bedroom house, and in 13 years, the house will be ours. If we were renting, we'd be paying more out of pocket, pay way more in federal taxes and have nothing to show for it.
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#128 of 139 Old 05-01-2009, 05:42 AM
 
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Originally Posted by lmonter View Post
So... for those of you seeing your house as an investment, how exactly is that going to work? I'm just trying to wrap my head around it...
For us, once we were done living in our house, we turned it into a rental. We have someone else paying the mortgage plus an additional $150 or so. Hopefully, it will be paid off in about 10 years and will be generating around $1400 a month for us (if rent rates don't increase).

By claiming it as a rental, we also get to double dip deductions for our taxes. I can count the mortgage interest against the income the house brings in, then we take our standard deduction.

We just bought a new lot and we're having another home built and we'll do the same with that one.
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#129 of 139 Old 05-02-2009, 12:12 AM
 
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about 42,000. We don't have a mortgage or student loans. That is for 2 cars and 2 credit cards.

Kelly,newly single mom of four wonderful children.

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#130 of 139 Old 05-02-2009, 09:14 AM
 
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My two cents: Yes, mortgage debt is debt. You still owe money to the bank, and if you don't pay it they can take your house away from you. Whereas, if you own a house free and clear, you get a place to live all your own, as long as you pay the taxes and insurance.

I think mortgage debt can be considered good debt simply because you're making payments towards the eventuality of owning the house free and clear, whereas if you're renting, you're paying for someone else's house. It would be very difficult to pay rent AND save up enough money to buy a house free and clear at the same time, especially if you're like us and your mortgage payments are actually lower than your rent used to be. For most people most of the time, owning is financially smarter than renting.

It's still debt, though. You also need to take into consideration that maintenance costs on the house, and disaster protection and things like that, are the owner's responsibility, things that renters don't have to worry about. It's acceptable debt to have, but it's still debt and it makes me uncomfortable.

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#131 of 139 Old 05-02-2009, 11:16 AM
 
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Originally Posted by Juliacat View Post
My two cents: Yes, mortgage debt is debt. You still owe money to the bank, and if you don't pay it they can take your house away from you. Whereas, if you own a house free and clear, you get a place to live all your own, as long as you pay the taxes and insurance.
Well, yes, of course, it's better to own a house outright, but, honestly, how many people of parenting age can do that?

I've read a lot of posts and I've noticed a trend. Most people who own a house have a mortgage unless:

1) They inherited either money or a house. Now, that doesn't count, really does it as good financial management because they didn't buy the house themselves. They lucked out, more or less.

2) They hit the market at just the right time and either bought low or sold high. Again, luck.

3) They live in a low cost of living area. This isn't just luck. It is choice, but we don't all have that choice depending on factors such as where we get jobs. But, yes, that is still a choice to an extent and more something we can control than 1) or 2) above.

The comparison is not about owning a house outright versus having a mortgage.

The comparison is having a mortgage and renting. If you rent, and you don't make your payments, they take away your rental. It's the same as if you owe on a mortgage but don't make your payments, right?

And you owe what's left on your lease just as you owe what's left on your mortage. Yes, a mortgage is a bigger commitment, but a lease is still a commitment and no one is counting a lease as debt.

I'm getting a little tired of people who chime in and say that they inherited money or a house or received a gift from family for a large down payment and so they have no debt.

I'm sorry, but that isn't the same financial management as someone who comes up with the down payment themselves and makes the payments and maintains great credit scores. It's just not.

Likewise, I see so many posts about people being debt free because their parents or grandparents paid for them to go to college. Yes, that is a blessing, but that is the easy way!

It's easy to be debt free is someone else paid for these major expenses.

I paid for college all on my own, because I had to, and because I really wanted to go to college. I also couldn't live at home because my parents didn't have a home and lived very hand to mouth. So, it's not like I had any option to save expenses by not having the dorm experience or something.

In fact, I financially helped my parents...a lot during college, and after.

I don't have a chip on my shoulder about any of this. I'm just saying I have a hard time understanding some of the views on debt and why people with more assets to begin with have fallen into financial struggle.

I came from a poor family, whom I've had to help out financially. I haven't even spent all my money on just myself and my household, but on other people.

I had to take out lots of debt to go to college, but I managed it and have it nearly all paid off.

I bought my house myself (and DH's help) with a down payment we saved ourselves.

We have savings from money we made and saved.

We have retirements.

We get by. We have great credit scores and other than house and student loans we have no debt and never have. We have never had one dollar of consumer debt and we pay off other kinds of debt right away.

The one blessing I see that has been to our benefit is having our health (big factor, no medical bills, which I know is a struggle for some) and we've never yet had a job loss from a lay off, etc.

Our "trick" or tactic is, I guess, just knowing how much you earn. Making a budget. Sticking to it. And not buying things you can't afford. Or if you want something, making it a goal, saving up for it, and paying for it.



Dave Ramsey and Suze Orman make a lot of sense, but it's really just common sense.
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#132 of 139 Old 05-02-2009, 01:52 PM
 
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My two cents: Yes, mortgage debt is debt. You still owe money to the bank, and if you don't pay it they can take your house away from you.
That's one reason I don't count my mortgage in "debt." Because if I stopped paying and the bank took my house I wouldn't owe them any money. My house is worth so much more than the mortgage loan on it the bank could easily sell and and they would not need to get any extra $ from me.

 

 

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#133 of 139 Old 05-02-2009, 03:30 PM
 
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The only debt we current ly have is for DH's student loans which is right about $8000.

SAHM to my sweet girl born in fall 2009

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#134 of 139 Old 05-02-2009, 06:34 PM
 
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Well, yes, of course, it's better to own a house outright, but, honestly, how many people of parenting age can do that?
Most of us can't, as you said, unless we got extremely lucky. That doesn't make mortgage debt not debt.

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I'm getting a little tired of people who chime in and say that they inherited money or a house or received a gift from family for a large down payment and so they have no debt.
So should they come in and say they do have debt?

Sometimes a mix of good luck and hard work can be a real help.

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#135 of 139 Old 05-02-2009, 08:19 PM
 
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Originally Posted by Juliacat View Post
Most of us can't, as you said, unless we got extremely lucky. That doesn't make mortgage debt not debt.



So should they come in and say they do have debt?

Sometimes a mix of good luck and hard work can be a real help.
Right. But then how come people aren't counting the rent they would owe on their lease as debt? See my point?

I think the comparison is mortgage versus rent. Not mortgage versus free place to live/own outright.

Yes, a mortgage is still debt, but so is an unsatisfied lease.

At least a house with a mortgage is also an asset.
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#136 of 139 Old 05-02-2009, 08:22 PM
 
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Originally Posted by Juliacat View Post
So should they come in and say they do have debt?

Sometimes a mix of good luck and hard work can be a real help.
Not sometimes. All the time. Good luck is a real help all the time.

Hard work pays off sometimes.

Bad luck never pays off.

What I'm saying is it's very different to receive a monetary gift through inheritance or otherwise than it is to financially plan and manage to be debt free or debt light.

And, further, it is not a financial lesson for anyone else on how to reduce debt or be debt free.
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#137 of 139 Old 05-02-2009, 08:47 PM
 
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We just have my husband's student loan and it should be paid off in the next 3 years.

A doula who married a cop & became a mama to 3 boys: G 12/22/00, my rainbow baby B 2/2/07 and L 2/10/10 my CBA2V baby, waiting for my little caboose late February 2013 & always remembering my two angels 2006 & 2012.

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#138 of 139 Old 05-02-2009, 09:02 PM
 
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I guess I don't think that taking out a loan in order to pay for something you couldn't possibly afford to buy outright (a house) is comparable to paying a monthly or even yearly fee for a service you need (a space in a house someone else owns). You could think of the remainder of a lease term as debt--I didn't exactly think of it in that word when I was renting, but I was certainly aware of how much money I owed on the lease. I also guess I'm stuck on the idea of being debt-free as meaning owning a house outright. Someday.

I agree with you that it's very different to receive a gift than it is to earn something. However, people who receive gifts still need to exercise responsibility and good financial management. If Grandma gives you a house and you take out a mortgage on it and use the money to buy beer--and a lot of people do things like that!--it will not get you anywhere. You still need to manage gifts wisely.

The way to reduce debt and eventually to live debt-free is to spend less than you earn.

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Originally Posted by That Is Nice View Post
Not sometimes. All the time. Good luck is a real help all the time.

Hard work pays off sometimes.

Bad luck never pays off.

What I'm saying is it's very different to receive a monetary gift through inheritance or otherwise than it is to financially plan and manage to be debt free or debt light.

And, further, it is not a financial lesson for anyone else on how to reduce debt or be debt free.

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#139 of 139 Old 05-02-2009, 09:29 PM
 
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Too much.


^#)))#@&&!^!##@__ Student Loans. They are all on forbearance/deferment right now, but they are the BANE OF MY EXISTENCE.

And all but 5,000 of them are DH's. For a degree he still doesn't have. (15 credits away):

Oh, and 5,000 on a CC from my first hospital birth(which I was forced into by MIL:::: and from 6 months of DH being unemployed and me only working 20 hours a week. Phew.

I think our grand total is something like 60,000, and considering DH isn't yet 25, that just blows my mind.
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