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Comment by SketchySeaBeast | Hacker News Reader

Also mortgages.

the very next paragraph:

> Mr. Beecher advised young men to get in debt if they could to a small amount in the purchase of land, in the country districts. <snip>

> This may be safe to a limited extent, but getting in debt for what you eat and drink and wear is to be avoided.

Secured debt and unsecured debt are different animals entirely.

Are mortgages really debt though? Because even though you owe, you also own as much as you owe (except during a market downturn of course). Whereas debt for a depreciating asset (like a car, or most things that go on a credit card) are what I would consider "real" debt. In other words, keep your net debt low or non existent (when looking at a balance sheet).

If you owned a house in 2008, I assure you, you'd feel that your mortgage was real debt.

Or if you ever got laid off.

Or if you ever got injured or severely sick and found yourself with shocking hospital bills.

When life hits you with something like that, suddenly that monthly payment, and the risk of foreclosure, bankruptcy, and severely damaged credit, all looms large over your head like the Sword of Damocles.

Yes a mortgage is real debt.

Sure, but most people who do take on mortgages do just fine. There will be exceptions but on the average, taking on mortgage to purchase a home in the US is generally a safe bet.

The majority of what you said is true of renting also.

Yes, they certainly are a debt, but they are, in general, considered a "good debt." Educational debt and business startup debt are also, in general, considered "good debt."

https://www.investopedia.com/articles/pf/12/good-debt-bad-de...

That being said, it's a general statement, specific cases of those can be "bad debts" if they are taken out recklessly and/or without forethought and planning and budgeting.

"Are mortgages really debt though? Because even though you owe, you also own as much as you owe (except during a market downturn of course)."

You also pay interest, which could be a huge amount (depending on how quickly, if ever, you pay off your principal).

The interest though isn't debt -- as soon as you sell the property, you only owe at that time the remaining balance, not the total amount of interest you would pay. In other words, interest is what you pay to rent the money used to buy the house.

==Because even though you owe, you also own as much as you owe (except during a market downturn of course).==

Do you own that much? Let's put some real numbers on this. You buy a $350k house, and put down $70k (20%). That leaves you with a $280k mortgage at 4%. This gives you a monthly mortgage payment of $1,337.

If you pay that monthly, you would own 51% of the house ($175k of equity) some time in the 16th year of your mortgage. After making 188 mortgage payments. Note, this doesn't include housing value appreciation.

COST

20% down - $70k

mortgage payments ($1,337 * 188) - $251,356

I suspect the parent is talking about leverage; and, your view of cumulative mortgage payments ignored the time value of money.

Of course it's debt. But it is secured debt, which is a bit of different risk profile.

Never forget though, you are paying quite a bit for the use of that money (i.e. the banks). This is mitigated in a rising market, but lots of houses (well land, really) don't appreciate fast enough to counter this.

Not to mention the additional costs. It might be more accurate to think of your house as a depreciating asset (the house) bundled with a (hopefully) appreciated asset (the land it is on)

Sure, you pay interest on the loan. By the time the loan is paid off you have generally paid well in excess of the original loan amount back to the lender. Borrow 100k at 4% for 30 years and at the end you have paid $171,870. Maybe the home appreciates at the same rate, maybe not. You are right in that it is better than credit card debt my a mile though.

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