Do you include your mortgage?

iVillage Member
Registered: 04-27-2004
Do you include your mortgage?
8
Tue, 12-21-2004 - 9:20pm

When you are looking at your debt that you are paying down, snowflaking, etc. do you include your mortgage in the total?

I've been considering my debt as the whole thing yet I'm finding when I just look at the non-mortgage debt to focus on (and still pay the mortgage as scheduled of course) it seems more managable and not so overhelming. I'm starting to look at it as "non mortgage debt" just for the sanity of not focusing on that huge number.

How do you look at this in your totals?

Avatar for sohappilyme
iVillage Member
Registered: 03-26-2003
Tue, 12-21-2004 - 11:41pm
Personally, I'm not including my mortgage.
Sarah
Avatar for cl_phocid
iVillage Member
Registered: 03-26-2003
Wed, 12-22-2004 - 5:26am
I am only focusing on "unsecured debt" - credit cards, in our case.

All my best,
Danni

iVillage Member
Registered: 04-05-2003
Wed, 12-22-2004 - 8:14am
I only look at one thing at a time. It is much more manageable that way, and a lot easier psychologically! Right now, we're focused on our cc's (13K), and when those are paid off we'll move onto my car (26K) and only then will we think about snowflaking extra to the mortgage! We set smaller goals too, so they're easy to reach. First a card with a $400 balance, then the next bigger, etc. It's always good to know the big picture, but I think looking at the *small* picture is good too!! ;)
Photobucket
Avatar for cl_beckymk
iVillage Member
Registered: 03-19-2003
Wed, 12-22-2004 - 8:59am

I'm with the others.

iVillage Member
Registered: 05-30-2003
Wed, 12-22-2004 - 11:56pm

I have the 2 totals: non-house and grand total. The non-house is just that-everything BUT the house. That's what we're pounding on right now. Although our grand total is big, (at least to me, lol), I know that once we're non-house debt free, the mortgage will drop quickly.

Yes, I consider the whole thing debt-good, bad, indifferent-doesn't matter to me. It's debt, which means it needs paid back. I know others look at it differently, and that's cool too.

I tend to focus in more on whatever it is we're paying off at the moment, not the whole picture. At the end of the month is when I take a look at the grand total.

Lisa

iVillage Member
Registered: 02-19-2004
Thu, 12-23-2004 - 10:46am
Until now I was just looking at credit card debt. I don't have a mortgage right now, but I had been excluding my student loan debt from my totals. I went and looked at it and figured out if I really make an attempt, I can pay my student loan debt off in 7 years. That is kind of depressing, because I have a plan to pay off cc debt by the end of 2005, and I was thinking I'd be debt free then. But I won't. I really have to turn my attention at the next item on the list.

Photobucket

iVillage Member
Registered: 09-22-2003
Thu, 12-23-2004 - 11:51am

I don't look at my mortgage as debt, but I do include it in my budget every month as a payment. I just applied for a small 2nd mortgage, and my 1st mortgage was included as money owed so I guess that is technically debt. It was quite scary to see what I consider to be a large figure as the amount of money I owe!

Like some of the others on this board, I categorize my mortgage as good debt especially since I will be able to use the equity built to buy a car and will pay off my 3 CCs. CCs, medical bills and money borrowed from family are what I consider to be 'bad debt', and what I see as paying down.

Some tips learnt about 1st mortgages. Unless it is your dream home and you plan to retire in that home, there is no point in trying to pay the mortgage down quickly. This is a ploy used by financial institutions to get you to add more money and it is not a benefit to you but to them. I used to add additional principal to my mortgage and found out that since it's not my home to retire in, there was no point.

iVillage Member
Registered: 03-27-2003
Thu, 12-23-2004 - 2:17pm

It's my understanding that there is still some benefit in paying down your mortgage, even if you don't plan to stay in the home forever. It's not as big a benefit as if you were staying forever, but it's still some, and the benefit is greater the earlier in the paying process you begin doing it.

Early in your mortgage years, most of what you are paying is interest. If you have high-interest ccs and other debt, it makes more sense to pay on those first, because your mortgage interest rate is probably relatively low. But once you are debt-free in other respects, paying on your mortgage essentially gives you a guaranteed rate of return equal to whatever your interest rate is, because any amount extra you pay goes on the principal.

In some cases, this may be less than you would get by investing the same amount of money elsewhere. And it is certainly less liquid than many types of investments. So it depends on the situation. But it is a safe investment, and certainly a higher rate of return (except in exceptional circumstances, such as in an area where home prices are depreciating--but even here, it might be of benefit to pay down your principal so that you are not upside-down in your mortgage, and can get out from under it when you're ready) than that obtained, for instance, on a savings account. Also, there is a small tax advantage in paying interest on a house, but it's not as great as the cost of the interest.

Anyway, depending on your situation, you may gain a better benefit by using your money for investments other than paying down your mortgage. But don't write it off completely just because you're only going to be in the house for a few years.

To answer the original question, no, we don't look at our mortgage when we're looking at our debt. It would be too depressing! LOL Also, we're paying less than we would to rent the same property, so it's more like rent, with the benefits of ownership, at this point.

We do look at it when looking at our net worth, which is another fun thing to do for those who, like me, are money junkies. Fortunately, our home is worth more than we owe on it (even though we bought it only eight months ago with no money down and only $1000 toward closing costs! We really did our homework first), so it actually helps on our net worth.

Once our other debts are gone, we may pay a small amount extra toward our mortgage, but probably not much. In our case, our goal is to, in a few years, buy a large piece of property in the country and build our own home. We want to pay as large a chunk of cash on the property as possible, and build the house with cash. So for us, having cash is a big deal, and paying on our mortgage is not as liquid an investment as we need. Our interest rate is very low (we bought at a good time), and we don't pay PMI (if you are paying PMI, it might be worth your while to pay extra on your mortgage until it's below the 80% so you can stop paying the PMI, which is a benefit only to the lender and not to you, and is a big extra expense every month). So instead we plan to invest in medium-term investments with a good rate of return (bonds, large cap mutuals, money market, CDs, etc.), and let our mortgage be. We will probably buy our new property before the old is sold, so having a large amount of equity in our current house won't help us much with our big goal.

Someone who wants to simply move into a larger home by conventional means at a later date, however, might benefit by having a larger amount of equity, and therefore might benefit by paying down their mortgage.

Anyway, that's my two cents. Good thread.

Heather