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Original poster

Do you think your mortgage is a debt

114 replies

HaudYerWheeshtBawbag · 18/05/2018 23:27

I don’t...

I think of it as an investment & not a debt that I would say in terms of a credit card etc...( I/We dot have one)

WDYT?

OP posts:
pallisers · 19/05/2018 04:08

Yes it's a debt. But it's a different type of debt. Most debt (credit card, car loan) you could reasonably do without the item in question and simply save up to buy the item at a later point. A place to live is different. Shelter doesn't come for free, and it's not a realistic option to wait until you have saved enough to buy a house, because in the meantime you can't put off the expense of funding somewhere to live. So for most people, if they were not paying a mortgage, they would be paying at least part of that in rent instead.

I agree completely with this.

Mummyoflittledragon · 19/05/2018 04:54

Ofcourse it’s a debt. Someone upthread said it’s posh rent. That is a good analogy, renting money in exchange for slowly owning a property.

dudsville · 19/05/2018 09:24

It's different to cc debt. Cc debt is just something you owe. My house has equity. I can sell and be free of this debt and have earned income in the meantime.

Teacuphiccup · 19/05/2018 09:25

dudsville
Only works if your house price goes up though. If not it’s just something you owe.

bridgetreilly · 19/05/2018 09:26

What a weird discussion. Of course it's a debt. Why wouldn't you think of it as a debt? You owe your mortgage provider a ton of money.

traciebanbanjo · 19/05/2018 09:28

Yes it's a debt, homes are not investments they are to live in.

Firesuit · 19/05/2018 09:39

Of course it's money I owe but given that prices rise year on year i make more than I pay in interest.

It's not an inevitability that prices rise. I sold a flat in London in 1998 for slightly less than I paid for it in 1989. And the area had improved during the time I owned it. (There was nothing wrong with the area or the flat, I would have been in a similar position with any other property. It was just the time that I bought that was the problem.)

During almost the whole time I owned it, if I'd lost my job and been unable to pay my mortgage, it could have been repossessed. Then I would have been homeless and (if the lender chose that route) bankrupt.

Firesuit · 19/05/2018 09:41

I had a 100% loan and at times the value of the flat was a third less than the loan.

MereDintofPandiculation · 19/05/2018 09:47

An investment is when you take money you actually have, and use it to purchase something else (property, stocks and shares, bonds, solar panels etc) in the expectation that you will be able to cash in the investment for more than you paid in the first place.

A mortgage is using money that you don't have, and therefore have to borrow.

If, instead of a mortgage, a rich relative were to lend you the cost of the house, would you regard this as a debt or an investment? I would say this is clearly a debt that you owe to your rich relative. (Depending on the terms of the repayments, the rich relative could regard it as an investment. Just as a mortgage is an investment by the building society - lending you money in the hope of getting a lot more back from you in the long term.)

Firesuit · 19/05/2018 09:48

I've just done a back-of-the-envelope calculation, and if I still owned that London flat now, nearly 30 years later, I would have made a 4.9% a year return on it. For most years prior to 2008 mortgage interest rates would have been higher than that.

Topseyt · 19/05/2018 10:03

To me homes are both investment and a place to live. The money owed on them is still a debt.

OwlinaTree · 19/05/2018 10:15

Well you lend money and pay it back so it's a debt. But realistically you need somewhere to live and that doesn't come free. The mortgage lets you live somewhere while you pay for it. At the end you have somewhere that you can live in for free.

It doesn't matter if the 'value' of the property goes down unless you want to sell. If you just want somewhere to live it's fine, you pay the mortgage and it's done.

StickThatInYourPipe · 19/05/2018 10:46

I add it into by debt list. My partner and I are currently snowballing our other debt but once that has been paid and we have saved up 6 months of bills, we will be going for the mortgage to get it gone as quickly as possible.

Tomorrowillbeachicken · 19/05/2018 10:47

Yes, but it’s low interest and in our case fairly flexible as we can overpay.

Grimbles · 19/05/2018 11:01

It’s a debt, the house isn’t mine it’s the banks

No, it's not. The mortgage is secured on the property but you still own the house. Otherwise you wouldn't be able to sell it.

Isleepinahedgefund · 19/05/2018 11:35

How bizarre to not think it’s a debt! Of course it’s a debt. Just because it’s a secured debt it’s still a debt. It isn’t an investment, you have to have cash to make an investment. You don’t fully own the property until you’ve PAID OFF THE DEBT secured against it. If the value of your house falls below the amount outstanding on your mortgage, you are liable for the unsecured shortfall.

I think it’s the snobbery that makes people come up with this good debt bad debt thing to try and differentiate between mortgages and other kinds of debt. People think the fact they’re a “homeowner” trumps an unsecured debt. But the truth is that you borrowed a shed load of money and you have to pay it back, you gave collateral in the form of a property and if you can’t make the repayments the lender will take the security from you.

BackforGood · 19/05/2018 12:24

In 2016, 53% of towns and cities average house prices were below 2007 levels, meaning lots of people still in negative equity.

Only if they took out 100% mortgages

Only works if your house price goes up though

Or if it stays the same. Or if you have a portable mortgage (such as an endowment). Yes, the value of property dropped massively between me buying and selling my first property, (early 90s) but equally, the cost of the next house I was buying had dropped massively too, and the 25-30% drop in the bigger house I was buying was a bigger amount of money than the 25-30% drop in the flat I was selling, so I still reckoned it was worth the 'hit' on selling the first property, due to the "bargain" of the next one.

Too many people are putting one circumstance in and assuming everyone's circumstance is the same.

Off course a mortgage is a debt, but it is very different from other loans.

MirandaWest · 19/05/2018 12:29

Of course it is a debt. You owe money.

As long as you aren’t in negative equity then the net effect is not debt, but the amount you owe the mortgage company is debt.

AnElderlyLadyOfMediumHeight · 19/05/2018 12:48

'I think it’s the snobbery that makes people come up with this good debt bad debt thing to try and differentiate between mortgages and other kinds of debt. People think the fact they’re a “homeowner” trumps an unsecured debt. But the truth is that you borrowed a shed load of money and you have to pay it back, you gave collateral in the form of a property and if you can’t make the repayments the lender will take the security from you.'

This. The social desirability of home ownership in the UK makes people not want to associate a mortgage with 'debt', which has associations of guilt, fecklessness and failure. They feel confirmed in this by rising house prices and the notion of the 'property ladder'. Indeed, it feels a bit like some people have assumed a sort of right to ever-accumulating house value. But it's a debt and it has the potential to lead to ruin, just like any debt.

pigsDOfly · 19/05/2018 12:54

Agree absolutely with what Sycamore said.

Yes, it is a debt as in you've borrowed the money and have to pay it back, but if you didn't have the mortgage you'd still need to pay rent. No one, unless homeless, gets out of paying for a roof over their head.

For a lot of people it can feel like an investment as most people, if and when they sell the house at some time in the future will hope to sell it for more than they paid for it, whereas if you buy a car on finance, for instance, you most certainly won't be selling that for more than you paid for it. And credit card debt is just debt.

CookPassBabtridge · 19/05/2018 13:17

It is a debt technically but a good one! Not like paying off a credit card or overdraft.

NameChanger22 · 19/05/2018 13:21

It's a debt, but the only debt worth having.

I don't have a mortgage.

WaitrosePigeon · 19/05/2018 13:22

Debt is debt.

inabeautifulplace · 19/05/2018 14:37

"It's a debt, but the only debt worth having. "

Not true currently. With 0% credit cards, you can build up debt on normal spending whilst investing the money elsewhere. That approach has given a better return than paying off the mortgage.

Adding to that, most businesses will use loans to grow the turnover. I know that's mostly not personal debt mind.

SilverySurfer · 19/05/2018 14:42

Of course it's a debt.