<p>I had a conversation with a friend today that left me stunned. She and her husband own their house in the affluent town we live in and have a daughter who’s a sophomore in college and a son who’s a senior in HS. The husband has a very good job. They spend freely but – as I said – the husband has a very good job. In addition to owning their house, they also own some property in another state, where they hope to build their retirement home one day. What stunned me was her telling me that in order to buy this property, they took out a huge home equity loan – which, of course, they have to continue to pay back every month, in addition to their regular mortgage. I was flabbergasted. Based on a rough guess, I think this means they owe about 60% of their house’s value.</p>
<p>DH and I owe about 12% of our house’s value (or, at least, what it is valued at normally) and have no other debt. It would never have occurred to me to purchase another piece of property by taking out a home equity loan. </p>
<p>First mortgage is about 15% of house value…we took a second recently and used it to refinance a small mortgage on our office building. That brought us to about 35% but the rate on the second was 4.49 percent and we couldn’t pass it up. Our business pays that loan and we have NO CREDIT CARD DEBT.
For years when we were first married I was a stay home mom. I shopped at garage sales and thrift stores, bought groceries on sale, etc. I could never figure out how the other people in our neighborhood lived such a much nicer lifestyle than we did.
I finally figured it out…credit card debt!
I hope your friend’s husband continues to have a very good job. That is a high ratio to owe…</p>
<p>H and I are in the last 5 years of an affordable mortgage. The housing market in our area is so bad, I won’t even pretend to know what percent of value that is - because nothing has moved in ages unless it’a a severely undervalued foreclosure situation. We have no other debt.</p>
<p>Our neighbors and friends all seem to have maxed out credit cards and large home equity loans.</p>
<p>We put 20% down on our house 8 years ago. Refinanced a couple of years later because interest rates went down - switched to a 20 year mortgage with same payments. Not sure just how much we’ve paid off, but I think we owe about 30% of what house is worth - it’s hard to be sure just how much it was worth - for a while it was more than double what we’d paid for it, I’d guess it’s still about double. Dh’s car is paid off, mine would have been if it hadn’t been totaled last year. We bought a new used car with a five year loan. We do have enough money in the bank that we could pay off the car loans. We have never ever had any credit card debt. No student loans either.</p>
<p>Back in the day home values were reliably increasing, I thought that what I ‘should’ do was buy a piece of rental property with my current home equity, and rent it out as well as improve the property. Then I’d be building equity in two properties, large amount of money owed or not. </p>
<p>My impression is that this is one way wealth is traditionally built, by using equity to purchase more property. Real estate downturn or not, I still envy my friends who did this years ago, and now have 3 houses a good way to being paid off, in addition to the appreciation in house value. Of course maintainance and keeping up with renters is like taking on another job. </p>
<p>I also have friends who bought land for retirement years ago, which has appreciated faster than local property. Smarter than saving and purchasing at inflated current prices. Property values in my state have held a bit better than some parts of the country. </p>
<p>Of course, dabbling in real estate now is seen as fool hardy, though I’m sure some are buying up to benefit from the current crisis. </p>
<p>Much of this depends on risk tolerance, of course. And is far different from maxing out credit cards.</p>
<p>Debt-free since around 1998 or 1999. Paid off the mortgage after 11 or 12 years. It was hard deciding on whether to pay off the mortgage or just hang onto the cash. Paying off the mortgage had the benefit of not having to write out the monthly check. And savings took off after the mortgage was paid off. I’ve asked my wife many times if she’d like a bigger house and she’s said no every time.</p>
<p>We paid off our house, where we’ve lived for 22 years, about 5 years ago. We’ve never had any credit card debt. H has a very good job, but we’ve always lived below our means. We take nice vacations and drive nice cars (we tend to keep them for 8-10 years), but have a modest house compared to others who are at H’s professional level. We’re frugal in many ways so that 1) I was able to stay home full-time when the kids were small, 2) now I can work part-time at a job I love which doesn’t pay much and 3) I can afford to buy all the books I want. :)</p>
<p>no debt. In the 22 years that we’ve owned our house, it hasn’t even doubled. We’ve paid off the mortgage and are waiting to downsize in the future.</p>
<p>Bought our house 10 years ago; at the top of the market it was a little over 2.5 times purchase price. Now, it’s at about 2x. Refinanced our 30-year fixed rate mortgage to a 15-year, 5.25% fixed five years ago, so a couple of years after the guys are out of college, that will be paid off. Makes a HELOC a little more palatable, to us and the bank. Our mortgage balance is about 25% of current deflated market value.</p>
<p>No car payments (we have two eight year old vehicles), credit cards paid in full every month. S1 is paying just over 50% of this year’s COA via scholarships, working over the summer and 10 hrs/wk termtime and Stafford, and about 35% of next year’s bill. We’re trying to do the rest from current income, which is why I just went back to work part-time and hope that will keep us loan-free until S2 starts college in the fall of 2010. At that point we anticipate we’ll need to borrow for the two years both kids are in college, probably via HELOC. We don’t expect enough FA to make a significant dent and don’t know how merit $$ will play out for S2. At some point in the next seven years (i.e., before S2 graduates from college) we also anticipate needing a new vehicle (small, fuel-efficeint, cheap).</p>
<p>We have always lived below our means, and due to major ongoing health issues and expenses, continue to do so. We are goooood at being cheap.</p>
<p>We have debt. We’ve moved eight times in twenty years with the military, so the very idea of being able to live somewhere and pay off a house is just completely foreign to me. </p>
<p>I can sleep at night because of the pension my spouse has earned with the military and because we are good at sticking with our financial plans. We’ve just not been able to deal with everything with cash as it came along.</p>
<p>I think CCers must not be the credit happy people I read about, at least the CCers posting to this thread. </p>
<p>I have a small mortgage 20% (?) on a house. We are looking for a winter home in SoCal and am wondering whether to take a mortgage or buy something with just the cash we have. </p>
<p>We bought a new modest house last year (love to look at houses is my weakness, so this is not the first mortgage), with 28 years and 8 months mortgage left to pay according to the schedule. The house loan is a 5-year ARM (6% interest rate for now). We have been making extra payments and are ahead of the schedule. No debt other than this mortgage.</p>
<p>I’m sure not…there is probably a selection bias going on here. Mostly ones who are financially conservative are answering.</p>
<p>House will be paid off in a couple of days–last payment will be Nov 1. You all are invited to a virtual mortgage-burning party. Cars bought with cash long ago. No credit card debt, but no big HDTV either. Got through putting D1 through college without having to take on debt.</p>
<p>We’ll need new cars soon, the house needs maintenance, and D2 is a senior in high school. I don’t know how long this debt free status can continue, but I am going to enjoy it now while we can.</p>
<p>Mortgage was paid off just before kids started college. We originally took out a 15 yr mortgage. Kids are out of school now and on their own. No cc debt and we pay cash for our cars. Husband retired this year. Have always lived very frugally, but since our empty nest days have splurged on things like HDTV. Kids complain we never had nice stuff while they lived here.</p>
<p>I think only the people who are pleased with the way things are going will respond.</p>