When Figuring Out How Much Debt You Have?
. Does a mortgage payment count? Or a car payment?
I dont really consider myself in debt, but I do have a mortgage payment and a car payment?
I pay extra on both without struggling.
I hear some people say they are 30 k in debt, but if you consider those 2 items I am like 225 k in debt. I think its more of an investment tan debt.
Can someone clarify.
I think what you need to consider is the difference between secured and unsecured debt. If you have a mortgage, it’s secured on your house (actually, that’s what mortgage means), so if you default on payment the bank can repossess your house and sell it to recover the money they’re owed. Similarly, if you have borrowed to buy a car, the car itself acts as security. Provided you can afford to keep up repayments on secured debt, it’s not usually a problem.
The worrying stuff is unsecured debt – credit cards, non-specific loans etc. They have their place; but if they get out of hand, watch out.
Hi,
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People generally do not count mortgage as one of their debts in discussion. On paper it is, but because it is also a huge tax deduction you are not effected by it like you are for cars and credit cards.
As most everyone has said, your mortgage and car are (of course) debt. However, they are a debt that you can receive something from. Credit card debt, certain loans, which you can’t sell and re-coop some of the money you have spent are the biggest problem and in my mind are considered “real debt”. I agree with you your house is an investment. The car, well, that depends on if you bought it brand new.
Of course the balance owed on your house and car are debt. You do not own these items because some institution paid the seller full price for them in your behalf because you promised to repay them with interest.
Your house may very well turn out to be an investment, but that has nothing to do with your current financial situation and your car will never be an investment.
You ARE $225k in debt.
The house is long-term debt, the way I calculate it as follows.
The amount you owe on the house is say for example $100,000.
The amount your house is worth is $120,000, that would be considered a non-liquid asset. So to be honest you are in debt of $100,000, however to calculate your networth you would be +$20,000.
It’s really up to you how to calculate it.
The car on the other hand is a straight debt, I wouldn’t consider it as an asset at all, unless it is a collectible car.
Don’t count a house you’re buying, but count what’s left on your car.