Would you class your home as good debt? Well, countless people might, but the reality is, it isn’t. Good debt is normally only found when you have invested in an asset. What is an asset, you say? Well, there are several definitions depending on who you speak to, but I think the following sentence epitomises it well: it is something that appreciates in value and/or can provide you with passive income, that pays for itself, and doesn’t need you constantly putting money into it.
So, what is good debt?
Good debt is debt that you have incurred by purchasing an asset that appreciates in value and/or can provide you with passive income that pays for itself, and doesn’t need you constantly putting money into it.
In this vein, your house could not be classed as an asset, because you live there and you have to pay the mortgage yourself through other means i.e. through working at your job for a wage to pay the mortgage or through the money you get from other assets. And even if you have paid off the mortgage, you would still have things to pay on the house, such as utility bills, council tax, repairs etc. So you will always need to have some income from some other means in order to finance the upkeep on your home.
Food for thought?
However, maybe you could class it has a sleeping asset ready to be realised whenever you choose to cash it in or remortgage? Well, maybe.
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