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A reader wants to know when too much of a good thing is bad.

Question: My husband and I are looking for our first house. Of course, the prices are outrageous. Yet our rent is outrageous, too. So we’re seriously looking.

I don’t mind moving into a small “starter” home, but my husband wants us to “buy as much house as we can afford.” He says our money is better spent on a mortgage than sitting in a savings account earning less than 1 percent.

I’m nervous about sinking all our money into a house, but he says mortgages are considered “good” debt. We don’t have any “bad” to speak of, since our credit card balances are never more than a few hundred dollars and one of our cars is already paid off, with the other having just six months to go.

Is my husband right? I figure a place called Debt.com can tell me if mortgages are “good debt” and therefore a good investment.

— Anita in New Hampshire

Howard Dvorkin CPA answers…

Your question reminds of the sultry movie star Mae West. She famously said, “When I’m good, I’m good. But when I’m bad, I’m better.”

Mortgages are the opposite of Mae West.

Mortgages are often called “good” debt for three reasons…

  1. Very few Americans can afford to plunk down $189,000 (the median price for an existing home) without getting a loan.
  2. Unlike, say, running up credit card debt to buy fancy dinners, you spend more time in your home than anywhere else.
  3. Historically, home prices go up, making it the most profitable investment for average Americans.

None of those reasons matter, however, if you can’t afford the monthly payments. Good debt can go bad. This was the very essence of the housing bubble that burst in 2007.

Let me hit you with something else that your husband probably isn’t considering: The cost of home ownership is more than just a mortgage.

Of course, everyone knows you have to maintain your house once you buy it, but now there’s a fresh new dollar figure provided by the real estate company Zillow

Nationally, U.S. homeowners can expect to spend $9,080 a year on average in hidden costs related to owning and maintaining a home.

Zillow divides “hidden costs” into two categories: “unavoidable” ones such as homeowners insurance and property taxes, and “maintenance expenses” that aren’t just fixing squeaky doors. It includes five-figure expenses like a new HVAC unit.

Interestingly, those hidden expenses fluctuate wildly depending on where you live. Check out this map…

For argument’s sake, let’s suppose your husband factored in these surprising costs. My other concern is tying up all your disposable income in one place. Debt.com has previously reported that Americans are stressing out about their retirement savings, and other countries are doing even worse. The scariest headline I saw in some time was this: The World Is Running out of Retirement Money.

I haven’t even mentioned what happens if you don’t have an emergency fund. I’ve been a financial counselor for more than two decades, and I’ve seen bad things happen to good people with “good” debt. How will you afford to recover from an accident or an illness if every penny is paying your “good” mortgage?

I agree with you, Anita. Dream big, but buy small. Live frugally, and your next home may be the home of your dreams.

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About the Author

Howard Dvorkin, CPA

Howard Dvorkin, CPA

I’m a certified public accountant who has authored two books on getting out of debt, Credit Hell and Power Up, and I am one of the personal finance experts for Debt.com. I have focused my professional endeavors in the consumer finance, technology, media and real estate industries creating not only Debt.com, but also Financial Apps and Start Fresh Today, among others. My personal finance advice has been included in countless articles, and has appeared in the New York Times, the Washington Post, Forbes and Entrepreneur as well as virtually every national and local newspaper in the country. Everyone should have a reason for living that’s bigger than themselves, and besides my family, mine is this: Teaching Americans how to live happily within their means. To me, money is not the root of all evil. Poor money management is. Money cannot buy happiness, but going into debt always buys misery. That’s why I launched Debt.com. I’m glad you’re here.

Published by Debt.com, LLC