Do you class Mortgages & Student Loans as debt?

Spendless

I'm also with the don't count mortgage as debt because I have to live somewhere and if didn't have a mortgage would have to rent. So only if renting was classed as in debt by rent money x 12months per year, would I class my mortgage as debt.

Dithering_Dad

Renting is different from paying for a mortgage because if you stopped paying rent you'd just be turfed out into the streets (after a protracted eviction battle where you'd probably get away with a few months free rent).

If you stopped paying on your mortgage, you'd be turfed onto the streets (after a protracted eviction battle), be given whatever equity is left over after the bank has sold your house cheaply at auction and suffer a ruined credit rating for the next decade. Our mortgage providers are not our landlords.

While it's comforting not to think of the huge amount we owe to our mortgage providers and to bury our heads in the sand and tell ourselves it's not a debt, if you borrow a principle sum, have interest added to that sum, pay a regular amount each month, then it's a debt.

p.s. I've done nowt on my coursework all day. Excellent!

MarkyMarkD

ZTD wrote: »

Mortgages are debt. However, unlike secured loans for cars and hp for 3 piece suites, they aren't consumer debt - you don't "consume" houses.

Perhaps that's all that's needed - a distinction between CDFW and TDFW?

I'm not sure that distinction works, given that you can shift any sort of debt onto your mortgage as long as you have the equity and income to support doing so. Debt doesn't become any less debt just because it's secured against your house as a mortgage rather than a secured loan (for example).

MarkyMarkD

tomterm8 wrote: »

In essence, when you are buying a home, your investment is the cost of the house, the cost of the interest, the cost of maintaining the house plus the oportunity cost of not investing your deposit money in an investment with higher returns than house prices.

LESS the cost of renting an equivalent property.

The main reason people buy rather than doing anything else is that it's the highest return on their investment they can get whilst borrowing the money - hardly anybody borrows to invest in equities because it's very hard to do so and people don't want the risks involved. With property, they don't see it the same way mainly because it's VERY easy to borrow the money and the downside risks don't seem as great.

ZTD

MarkyMarkD wrote: »

I'm not sure that distinction works, given that you can shift any sort of debt onto your mortgage as long as you have the equity and income to support doing so. Debt doesn't become any less debt just because it's secured against your house as a mortgage rather than a secured loan (for example).

You can, but that is still consumer debt because it was used to buy consumer items. Consolidation loans do not affect the price at which you bought your house at. So take your house purchase price, run the amortisation over time against it, and any debt above that is consumer debt.

Though that's a long way of finding out something you already know - mhow much debt you laid on top of your mortgage.

prophecy_grrl

I don't class my mortgage as debt. If I was living in rented accomodation, I wouldn't class my rent money as debt repayment - this is my valley girl logic now mind!

Also, I dont class my student loan as debt, or my DH's. This gets taken out of the paypacket with tax NI pension etc every month - yes I wish we could have had a free education but there we are, it's just getting paid for bit by bit.

The only debt we have is 2 loans and 2 CCs - and I will stick my fingers in my ears humming the theme tune to the a team if anyone tries to tell me otherwise

Spendless

Dithering_Dad wrote: »

Renting is different from paying for a mortgage because if you stopped paying rent you'd just be turfed out into the streets (after a protracted eviction battle where you'd probably get away with a few months free rent).

If you stopped paying on your mortgage, you'd be turfed onto the streets (after a protracted eviction battle), be given whatever equity is left over after the bank has sold your house cheaply at auction and suffer a ruined credit rating for the next decade. Our mortgage providers are not our landlords.


p.s. I've done nowt on my coursework all day. Excellent!

You'll have to convince me with a different argument to this one. There is not always equity left after a house has been re-possessed. (my husband had his 1st house re-possessed;) ). Also there are differences between renting and mortgage, one being that you can *probably* pay less by finding a different provider but stop in the same house something you can't usually do with renting.
Just giving me an example of a difference between renting and a mortgage isn't enough to convince me one is debt when the other isn't.

Dithering_Dad

Spendless wrote: »

You'll have to convince me with a different argument to this one. Just giving me an example of a difference between renting and a mortgage isn't enough to convince me one is debt when the other isn't.

Here's a dictionary definition of debt:
An amount owed to a person or organization for funds borrowed. Debt can be represented by a loan note, bond, mortgage or other form stating repayment terms and, if applicable, interest requirements. These different forms all imply intent to pay back an amount owed by a specific date, which is set forth in the repayment terms.

But as far as convincing anyone of this if they don't want to be convinced is about as practical as convincing the pope that evolutionism is the true path and that Adam and Eve were monkeys. Hmnn, a whole different argument there...

Gemmzie

I don't count the mortgage as a debt because it has more equity in it than the amount of the mortgage.

I do count the secured loan as it was from unsecured and just transferred, not for anything investment wise (i.e. home improvements, car etc)

I don't count student loans either, as it's an investment

tomterm8

MarkyMarkD wrote: »

LESS the cost of renting an equivalent property.

The main reason people buy rather than doing anything else is that it's the highest return on their investment they can get whilst borrowing the money - hardly anybody borrows to invest in equities because it's very hard to do so and people don't want the risks involved. With property, they don't see it the same way mainly because it's VERY easy to borrow the money and the downside risks don't seem as great.

In practice you can't effectively predict either (a) the cost of renting an equivalent property or (b) the cost of interest or (c) the final house price, or (d) taxes on your property or (e) how many times you'll have to move, it is virtually improssible to give a rational (economic) evaluation of whether it's financially the best option to own your own house, or to rent.

Actually, if you look at the historical figures, over a 25 year mortgage period, assuming you move every 5 years (i.e. you are relatively more stable than the rest of the population), then if you invested the difference between rent costs and mortgage costs, most people would have ended better off renting that owning their house.

On the other hand, if you owned your house, and didn't move for the full 25 years, on average you would be better off owning the house than renting full stop.

[ because people don't save the difference between renting and owning, in practice most people getting a mortgage is enforced saving, since the rise in house prices should cover the cost of interest ]

== more on topic ==

if you rent you may be in debt [ (the notice period of the contract * monthly payments) - deposit]

if you have a mortgage you are in debt [ the total repayment cost of the mortgage]

if you have a student loan you are in debt.

But not all debts are bad:) Student loan, and mortgage loans are generally the cheapest around. You'd tackle them last, and with student loan they may very well be lower priority than saving.