Do you class Mortgages & Student Loans as debt?

Spendless

tomterm8 wrote: »

But because people don't save the difference in practice between renting & owning your house is enforced saving.

What about when the mortgage is cheaper than the equivalent rent on the same property?

immoral_angeluk

We haven't got a mortgage or a student loan. We rent our house from a housing assocation for just under £300 a month. Things are tight as they are there is no way we could afford a mortgage!! If we did however I would still class them both as debt as you still pay interest on them.

For example would you call a 0% credit card or car loan a debt?

Softstuff

I count our mortgage as debt, just as I count OH's student loan as debt. Nothing to do with dictionary definitions for me though, it's just that I simply don't feel comfortable owing money for stuff. And these are now all we owe money for.

For me paying these off will be my number 1 priority until they're gone. Then after that I'll build about a 5k comfort zone in savings, and relax a bit.

Also for us, having a mortgage here is only $50 a month dearer than renting exactly the same property. If most renters only had to pay an extra 20 quid to own their home I reckon most would!

tomterm8

Spendless wrote: »

What about when the mortgage is cheaper than the equivalent rent on the same property?

In economic theory, that should never happen. Because the housing market is not an efficient market, it DOES sometimes happen, and then you are better off buying the house and thanking god for your good fortune.

The house prices are about to increase sharply in your area.

[ But if you intend to move within the next three years, which is still more stable than the average housebuyer, you may STILL be better off renting the house, since you're forgeting the costs of stamp duty and mortgage fees]

Sus1e

I class my mortgage as a debt, but a debt I can live with. I am overpaying where possible but I still think of it as an investment and security for my family. It would cost as much for us to rent as it does to have the mortgage so I don't see the point in not having a house (This makes total sense in Susie Land which is really all that matters)

My student loan on the other hand is definately debt that needs to go - at the time when I got it it was a necessity to live (didn't use Credit cards but lived within the loan and parent contributions at the time).

I have no other debt except the mortgage or student loan.

To be honest, I really shouldn't be posting on this section of the forum but the people on here are so nice and I am getting loads of inspiration by reading what people are doing which is helping me stay out of debt and reduce our household income.

cupid_s

I class both our student loans and mortgage as debt, but I find that a lot of people I speak to don't. I try telling them that we have 96k of debt and they don't agree because 'almost everyone has a mortgage and student loan'.

My mortgage is cheaper than rent on the property would be, taking into account lost interest on my deposit, and whilst that doesn't include upkeep costs my house has increased slightly in value since I bought it.

I count my mortgage more as a debt than my overdraft because my overdraft is interest free! So atm paying off our mortgage is more important than paying off our 3k overdraft.

Spendless

tomterm8 wrote: »

In economic theory, that should never happen. Because the housing market is not an efficient market, it DOES sometimes happen, and then you are better off buying the house and thanking god for your good fortune.

It most certainly can happen because that is the situation we are in. We bought this house just over 5 years ago, 12 months before the house prices started to rise rapidly here. Previously I had a house in neg equity for many years and DH has had a house re-possessed before. Everyday I thank god we bought this house when we did.

DontDoDebtKids

This is a very interesting thread and a topic that is on my mind of late. I have tried to take all the emotion out of thinking about this, and rely on purely logic and facts, so here is/are my two pence/cents (or at least my feeble attempt at putting my thoughts in order):

1) Debts

Mortgages and student loans, as well as all the rest (credit cards etc.), are debts. You have to pay back what you borrowed. You also have to pay interest on what you have borrowed.

It makes sense to pay back debt quickly if you are paying more interest on what you have borrowed than what you could earn on the money borrowed. This is most often the case. Exceptions are 0% credit cards, see stoozing.

Renting, in effect, means that you will have no debt connected with you housing, so this is good.

2) Housing Costs

You will always have housing costs (much like you have motoring costs). Applying Martin's idea of "pay the least for the standard you want" is probably the best way of looking at this issue:

i) The possible range in the standard of your accomodation will be dictated by your income (note that income can be from any source - pension, salary, investments).

ii) Your personal comfort zone, taste, requirements, etc. will then force you to choose a particular type of housing within this range.

iii) There will always be a certain cost to this - if you own the house/flat: mortgage payments; upkeep; improvements, bills, tax etc. - or if you rent the house/flat: rent payments, (sometimes) bills, tax, etc. so you have to try to minimise these as much as possible - again paying off mortgages quickly is good as is hunting around for the cheapest rent you can find.

The difference is that when you have paid off your mortgage, you will have decreased your housing costs considerably by not having any more mortgage payemtns (good) and paid off an interest bearing debt (good).

If you rent, you will never achieve the same result as you never own the place. Also your monthly costs will probably be higher - logic dictates that property is rented for the cost of the property + a profit margin - as you have to pay for the landlord's profit.

Conclusion surely is that you should buy your house/flat and aim to pay off the mortgage as soon as possible.

DDDK

tomterm8

Spendless wrote: »

It most certainly can happen because that is the situation we are in. We bought this house just over 5 years ago, 12 months before the house prices started to rise rapidly here. Previously I had a house in neg equity for many years and DH has had a house re-possessed before. Everyday I thank god we bought this house when we did.

To clarify, I mean that the cost of your rent is higher than the cost of your mortgage, at the moment you buy it.

It's likely that over time, the property increases in value at a rate faster than the interest rate, so that the mortgage should (hopefully) eventually be lower than the cost of renting the property.

ifstar

Until I first visited this site, I didn't regard my mortgage as a debt. I went along the lines of thinking that it was something you had for x years and paid the set amount until it was done. I never really considered overpayments on it and the effect they might have.

I would say that it is definitely a debt, but one that isn't quite as worrying if you were just to go along and pay off the set amount every month. I don't agree with being rich "on paper" either. I bought my flat 6 and a half years ago and it has probably jumped from £40k to £120k making me £80k richer on paper, however if I was to sell and move then I would need to spend that extra amount on the next property to get something of a similar sort of size. I think the "on paper" argument only works if you would be able to move elsewhere for similar or less price. (hope that makes sense!)