Good Debt vs Bad Debt


As a Realtor, I think buying real estate (even if it means you need a mortgage, ​as most of us do) and “going in​to debt” is a great thing. Kind of an odd statement right? Well, real estate is a perfect example of “good debt”. It is an investment and chances are, if you hold on to it, will appreciate in value.

I don’t like debt on anything that is not going to have the potential to make me money.  I have yet to own a new car, though every year I tell myself that “this year is the year”.  But there is something both humbling and satisfying about a decent vehicle that is paid for. The floor mats may be covered in memories of summer (a.k.a 2 pounds of sand) but it’s not yet rusty and it has minimal smell.

​I look at home ownership like this, ​we all need somewhere to live. You either pay rent or you pay yourself. The hurdle is getting that money for a down payment. The most common lament I hear from people is that they need 2 years or even 5 years to save up their down payment. I also hear a lot of people saying they don’t make enough money to save up a down payment. For more on that check out last week’s blog here:

The reality is, a lot of things can change in 5 years time. That $250,000 house may go up to $300,000. Mortgage qualification rules could change. I always say if you are putting that money out to a landlord right now anyways, it might be time to ask a​ family member​ for a loan, borrow or save up faster by really eyeing your finances to come up with a down payment. Finding ways for people to save money faster is a personal favourite of mine. I have discovered in my time that the folks who think they just don’t have the extra money to save are usually the ones that do!  The latte factor is a great way to illustrate where money can be saved. 5 lattes a week = 20 a month @$5 each = 100 a month. Or another way to cut back and save expenses would be to pack a lunch instead of eating out twice a week = $100. These are just some small suggestions. If you ARE serious about wanting to buy a home, but lack the down payment, you need to sit down and think about where you can save each month.

The best part of getting into home ownership is starting to pay down the mortgage. Over time, the market value of your home should ​go ​up and with your mortgage being paid down, you’ll have equity you can leverage to do more with.
LEVERAGE (one of my favourite words), coming up in a future post!