I used to have a lot of respect for The Wall Street Journal. They’ve got some pretty smart writers there. I saw an article recently, though, that blew my mind. The gist of the article is revealed in the title: “Nine Reasons to Love Your Mortgage: There’s an Upside to All That Debt”
There are no reasons to love your mortgage. Teach your kids this. Personal debt is an evil – or at the least, a nuisance – to be tolerated only until it can be squashed like a bug.
Why should you hate your mortgage?
But let’s go over the points in the article, shall we?
- It’s your cheapest way to borrow
Technically, this is true. There is no other debt out there with an interest rate this low. That’s because, if you stop paying, the bank takes your home. Rosy upside, eh? Debt, in any form, is never a good idea.
- It’s a negative bond.
The author is saying here that it’s an “investment” that pays a negative interest rate. Nope, I’m not buying it.
- It leverages your entire financial life.
Leverage. Borrowing a bunch of money on a little bit of money down. You know, putting your own future on the line.
- It’s a backup source of emergency money
You mean, because you can borrow more against your house? With money you’ve “saved” at negative interest? No thanks.
- It makes inflation your friend
Let’s get this clear: Inflation is never your friend. If inflation is 2%, that means that 2% of EVERYTHING YOU’VE EVERY SAVED has just been stolen from you.
- It lets you profit from falling interest rates
Sure. If you refinance. And re-up for another 30 years? And maybe take a little cash out?
- It’s an effective way to build wealth
For a bank.
- It’s your default investment
For too many Americans, this is true. Problem is, a house is not an investment. It goes down in value as it ages. It goes up in price only due to inflation.
- Paying it off can drastically reduce your cost of living
Are you kidding me? This is like saying that taking the plastic bag off your head can increase your air quality. The solution is not to take on the debt in the first place.
I realize I’m being a bit of a heretic here. It’s the American dream, to buy a house. Somewhere along the line, it became fashionable – expected – beneficial – to take out a mortgage, and not only carry it to term, but to refinance and cash it out several times over the decades. How did it become fashionable to sign up for 40 years of debt?
You – the parent – can change this. Talk to your kids about debt. Let’s say they’re in their teens now. If you could say something to them now that would mean they wouldn’t STILL be in debt when they’re in their 50’s, would you? You can. Talk to them. Debt is a bad deal.
I don’t care what the Wall Street Journal says.