Is there such a thing as “good debt” and “bad debt”?
Perhaps. I can see the latter being the domain of most consumer debt. When people charge things up on credit cards, then get the bill and say “umm, I can’t pay this now but I’ll pay it later” – that’s bad debt. Unless there are extenuating circumstances, it’s just not sound judgement to take on such debt. There is blame to be dished out, and it falls squarely on the consumer.
However, some debt is considered good. Or, maybe better put, not as bad. Student loans, if reasonable, can be good debt. If excessive, and for an education consisting of an unemployable major or from an overpriced school, it can be bad debt. This is another topic for another post, which will be a good time to get into that discussion.
In this case, one type of debt that seems to fall into the middle of good and bad is housing debt. Now, most people realize that a mortgage isn’t good debt. That being said, I have heard a few people – including one I had thought was otherwise quite sharp – actually try to argue that it’s okay to take on a bigger mortgage because you get a bigger tax deduction. HELLO! That makes no sense, and I don’t find that to be true!
Okay, so we can rationally agree that mortgage debt isn’t good. But is it bad? This is where some folks – and I think perhaps most – think that it’s just a normal part of life. In other words, it’s just what you do. You grow up, get married, and get a house. Or maybe you don’t get married but get one, or you buy a condo instead. Or, perhaps you do what another blogger did and choose to live in a low cost of living country. Whatever the case, taking on a mortgage and buying a home seem to go hand in hand, like a couple 🙂 And, almost like a rite of passage for many adults.
Does it have to be that way? Well, maybe it’s just realistic for folks who want to buy to take on a mortgage, the way our society is set up. However, maybe it should be a matter of practice to genuinely viewing housing debt as being at least semi-bad – and that we should eliminate mortgage debt quickly . The way to do this might be to get rid of the mindset that a 30-year mortgage is normal, and aim for a 10 to 15 year payoff period instead.
Think about two things:
1) Wouldn’t it be great to go through your monthly expenses, and know that NOTHING is being spent on a mortgage (or rent)?
2) Remember that there are tons of home-related expenses that you already have to pay anyway. One of which is taxes, which won’t go away – and is an example of why you truly don’t ever really own your home free and clear. (Yes, you can have the mortgage paid but you don’t want to see how fast the home can be taken away if you never pay your taxes. Those don’t go a way when the mortgage is over!)
My Questions for You
When looking at debt on the dimensions of good or bad, how would you characterize mortgage debt?
Do you think most of us are too cavalier in how we consider mortgage debt to be so “normal”?
What are your thoughts on the notion that we don’t truly ever own our homes?