3 ms·

This has to be mostly mortgages, which makes it a little misleading.

by simon_ 16y ago

yummyfajitas 16y ago
Why is it misleading?
- rdl 16y ago
  Generally, mortgages are an amount less than an asset someone has. It would be kind of absurd to consider a person with a $500k house and $50k in outstanding mortgage to be worse off than a person with $0. Mortgages also generally (depending on the state) are non-recourse; if your mortgage is for more than the property is worth, you can hand in your keys and walk off with no additional liability. I agree from a cashflow perspective, a mortgage even if you have substantial equity can be bad, but most people don't get into debt trouble from mortgages, unless they got some kind of absurd mortgages for close to the value of the property, resetting ARMs, and fundamentally have more house than they otherwise would have purchased. True, a lot of people did this, but it's a historical anomaly. But I'm sure you knew all that and were just trying to make a point :)
  - yummyfajitas 16y ago
    So it's misleading because they listed debt rather than net worth? I'm not sure "misleading" is the right term - I'd use "a correct number, properly labelled, but which answers a different question than the question rdl wants answered". Incidentally, I'm not sure why mortgage debt is more misleading than other debt. If I have $500k in the bank but owe $50k on an auto loan or credit card, is that somehow worse than owning a $500k house with $50k mortgage debt? As for the call-option nature of loans, that only applies in a few states (admittedly including CA and TX), and only to some loans (mostly only the first loan). While you are probably right that some mortgages should be excluded for this reason, I'd be surprised if they were the majority.
    - jhamburger 16y ago
      The reason mortgage debt is better is because the asset borrowed tends to appreciate (although obviously not in the past 5 years) whereas with a car loan or credit card the asset(s) depreciate quite rapidly, on top of the fact that the interest is much higher and not tax deductible.
- locopati 16y ago
  A mortgage is also potential equity whereas your credit card debt is not. I'm going to pay to live somewhere (rent or mortgage). If I have mortgage debt, that 'rent' payment is becoming ownership. In addition, the interest on that debt is deductible so, to some degree, it comes out in the wash (so to speak).
nhangen 16y ago
This says consumer debt, which I assume excludes mortgages, right?
jhamburger 16y ago
More than a little. And I didn't think consumer debt included debt used for investments like a mortgage, so it seems like this is just a case of wolfram alpha not interpreting a query correctly.
mtw 16y ago
by definition, mortgage is still a debt
- jrockway 16y ago
  Yes, but it's a special kind of debt. There's a reason why you pay 25% interest on credit cards and 4% on your house.
- tptacek 16y ago
  Mortgage debt is secured.

This has to be mostly mortgages, which makes it a little misleading.

by simon_ 16y ago

This has to be mostly mortgages, which makes it a little misleading.

yummyfajitas 16y ago

Why is it misleading?

rdl 16y ago
Generally, mortgages are an amount less than an asset someone has. It would be kind of absurd to consider a person with a $500k house and $50k in outstanding mortgage to be worse off than a person with $0. Mortgages also generally (depending on the state) are non-recourse; if your mortgage is for more than the property is worth, you can hand in your keys and walk off with no additional liability. I agree from a cashflow perspective, a mortgage even if you have substantial equity can be bad, but most people don't get into debt trouble from mortgages, unless they got some kind of absurd mortgages for close to the value of the property, resetting ARMs, and fundamentally have more house than they otherwise would have purchased. True, a lot of people did this, but it's a historical anomaly. But I'm sure you knew all that and were just trying to make a point :)
- yummyfajitas 16y ago
  So it's misleading because they listed debt rather than net worth? I'm not sure "misleading" is the right term - I'd use "a correct number, properly labelled, but which answers a different question than the question rdl wants answered". Incidentally, I'm not sure why mortgage debt is more misleading than other debt. If I have $500k in the bank but owe $50k on an auto loan or credit card, is that somehow worse than owning a $500k house with $50k mortgage debt? As for the call-option nature of loans, that only applies in a few states (admittedly including CA and TX), and only to some loans (mostly only the first loan). While you are probably right that some mortgages should be excluded for this reason, I'd be surprised if they were the majority.
  - jhamburger 16y ago
    The reason mortgage debt is better is because the asset borrowed tends to appreciate (although obviously not in the past 5 years) whereas with a car loan or credit card the asset(s) depreciate quite rapidly, on top of the fact that the interest is much higher and not tax deductible.
locopati 16y ago
A mortgage is also potential equity whereas your credit card debt is not. I'm going to pay to live somewhere (rent or mortgage). If I have mortgage debt, that 'rent' payment is becoming ownership. In addition, the interest on that debt is deductible so, to some degree, it comes out in the wash (so to speak).

nhangen 16y ago

This says consumer debt, which I assume excludes mortgages, right?

jhamburger 16y ago

More than a little. And I didn't think consumer debt included debt used for investments like a mortgage, so it seems like this is just a case of wolfram alpha not interpreting a query correctly.

mtw 16y ago

by definition, mortgage is still a debt

jrockway 16y ago
Yes, but it's a special kind of debt. There's a reason why you pay 25% interest on credit cards and 4% on your house.
tptacek 16y ago
Mortgage debt is secured.