Honestly at that point it might be worth mortgaging the home all over again just to get rid of that debt. Even at that admirable pace and taking today’s higher mortgage interest rates you’d probably end up saving $2000
Debt free, own two paid off cars old enough to be cheap but new enough that the maintenance isn’t too bad, and also they get good milage. We don’t own a truck or an SUV. We rent, cook at home 90% of the time, and we’re only just making it.
If someone offered you a loan right now at 1% interest, you could take it, put it in a savings account, and get 4% interest. For a net gain of 3% on whatever the loan amount is. That’s the most basic example of good debt.
Investment mortgage debt is good if it contributes to tax deductible claims. Owner-occupied debt is good if it’s managed properly. Both are good because you own an appreciating asset.
Credit card debt is good if you don’t hit payable interest, leaving your money to work for you in other ways.
Commodity debt is good if the market swings in your favour.
Business debt is good if it results in surplus revenue generated.
Education debt is good if it’s contributing to future and higher employment gains.
Basically all debt is good if it’s managed properly and results in a net gain somewhere.
…you’re claiming that because some debt is good and some debt is bad, all debt is bad? Your first statement quite literally negates your second statement.
None? A lot? The concept of debt is confusing to me because there’s a moral way to look at it and a legal way. Have I ever asked for a loan or favor I later didn’t pay for? No, I owe nobody anything. But legally, you have economic principles, like unnecessary medical expenses or ones which you didn’t know an action of your were accumulate, which are only debts in the sense that the law says so. I owe medical providers something like a few thousand dollars (which my legally recognized debt can be rounded down to) for things like this and this, and an online course I take decided to say I owe them without telling me, though they haven’t dropped me (yet).
Only debt we have a mortgage we owe 226k on. Cars are owned outright and were paid off early. Student loans we paid off early. We generally live below our means. CC’s are used for general purchasing and paid off in full each month. They are basically a stop-gap for fraud protection.
I’m in the exact same boat, to the letter. It’s been great watching interest rates and inflation eliminate 60% of my home buying power in the last year.
In 2008 the economy tanked because the banks had made a habit of cough approving mortgages that they knew people couldn’t afford in the long run. Then they auctioned off those subprime mortgages to smaller banks, and played hot potato until oopsie, economic depression.
If we’re in this boat, who the fuck is buying a home, who approved their loan, and how the fuck is 2008 not right around the corner again?
Thankfully, we are not at risk of another 2008 housing crash at this time - or at least not for the same reason.
The extremely (almost irresponsibly) abridged version of the 2008 subprime mortgage crisis is that banks were giving out loans to people who could not afford to pay them.
The similarly simplified version of what’s going on today is that people cannot afford to take a mortgage and aren’t getting them. Back in the bad old days loan officers would have given out the mortgages anyway to boost their numbers and the bank would have bundled that loan with others to hide it and started the game of hot potato. That isn’t what’s happening today.
That’s not to say a market crash the size of the '08/'09 crash won’t happen, or won’t happen soon, or won’t be caused by the housing market. It’s just that the circumstances that triggered the 2008 crash aren’t present today.
The extremely (almost irresponsibly) abridged version of the 2008 subprime mortgage crisis is that banks were giving out loans to people who could not afford to pay them.
This is the comparison I’m drawing, because it’s what is happening again.
A 200K home mortgage isnroughly 2000/mo. It’s not doable for median income, and the .median house price is like 380k right now. The math doesn’t check out.
Yes. Today you’ll hear people online talking about how mortgages are unaffordable. If they somehow decided to apply anyway the bank would reject them.
The difference between now and the years leading up to the 2008 crash is that loan officers would have given people those mortgages despite the payments not being doable as you said.
A lot of banks were offering variable rate mortgages that had lower interest for the first few years of the loan and advertised this lower monthly payments. This would get applicants in the door. When they asked about the later interest increases (that would bump the monthly payments higher than they’d be able to afford) they were assured that they’d be able to refinance their debt.
This and other shady sales practices are not happening today largely because federal regulations and oversight placed after the fact.
The TL;DR is that the math on mortgages doesn’t check out for a lot of people. In the early 2000s banks were more than happy to give you a mortgage anyway. That simply isn’t happening right now.
It is, though. People are buying homes who cannot afford them all over the US right now. It’s not as though home buying has ceased with the interest rates.
Can you provide a reputable source that large numbers of people are taking mortgages they’re likely to default on?
I have not heard any reporting saying that is happening. I do, however have a family member who works in banking and interfaces with federal regulators that enforce the laws passed to prevent future subprime mortgage crises.
No. My source is basic arithmetic. The math just simply doesn’t check out. Banking isn’t rocket science.
A 200K home mortgage is roughly 2000/mo mortgage. It’s not doable for median household income if about 75k, or about $4200/month after taxes, while grocery prices inflate over 10% year in end, and the median house price is like 380k right now. The math doesn’t check out.
There’s no subprime market ready to collapse. This isn’t a housing bubble. The increase in prices is partially demand and partially inflationary imo.
Interest rates will keep prices level but we aren’t going to see a crash cuz all those companies are cash flush after the ppp fraud and rental Rates skyrocketing. The only houses on the market are ppl who have to sell or ppl who died.
No one wants to jump out of a 3.2% mtg and into an 8% one
I think the interest rate has a lot to do with the declining value of commercial real estate. I think the banks are trying to cover losses. Small businesses going fully remote makes it difficult to sling commercial real estate at the old rates.
I think this is also behind the odd fetish of returning to the office we read so much about.
Oh, I “can”. I just know that $4000/mo is not what we can “afford”. We’d sooner squeeze into her apartment for $1000/mo and not be responsible for anything.
I mentioned in this thread somewhere that I believe we’re in for another 2008 collapse. If I cannot afford a mortgage who the fuck is signing those papers? Same uneducated buyers and predatory lenders as in 2003-2008. I predict a collapse starting this time next year based on I’m high and I just woke up.
None that I would call bad. Less than 10k school loans, about 3K on a new car I a bought a few years back, and 110K on my mortgage. It’s all under 3% fixed rate and well within my budget though, so I’m not too worried.
That said I won’t be taking out any new loans or refinancing for quite some time thanks to current interest rates.
I’m almost 3k behind because my parents forced me into choosing college or the military at 18. I wasn’t remotely ready for either (was dealing with extreme gender dysphoria at the time) and I’m deeply opposed to the army but sometimes I wish I had chosen otherwise… I don’t know if I’m ever fixing this. All my cash goes to survival and everything I own is constantly breaking. Poverty is a vicious cycle…
It’s crazy that parents are still forcing kids to go to college when it’s been documented a billion times how often people are getting no benefit but tons of debt.
I have made it a point to live a debt free life as much as possible. My only debt is my mortgage. I’ve had a couple of car loans in the past, but nowadays not even that. I have quite enough wheels; If I buy another vehicle it’ll be with cash. If I can’t do that, I don’t need it right now. (2 cars, 1 truck, 7 motorcycles. It’s going to be a cold day in hell before my ass is out of transportation options.)
Credit cards are a little high but that’s just because I just took a vacation to Japan. I feel like I’m in a good place otherwise. I was lucky enough to buy my house before the pandemic when interest rates were super low and prices hadn’t yet spiked so I’m hoping to sell it in a few years when the interest comes back down. My loans are 50k I took out of my 401k as a down payment on house, 35k for a heloc to fix the house, and 20k on a personal loan.
I live in the Midwest region of the United States.
$55k in student loan debt, down from $100k eight years ago. $10k auto loan. $210k on the mortgage, which I honestly can’t believe I was ever approved for. No credit card debt.
There have been some very scary moments, but I’ve somehow managed to keep my head more-or-less above water so far.
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