Читать книгу More Straight Talk on Investing - John J. Brennan - Страница 45

For most people, the single biggest debt obligation is a mortgage. The question here is not whether to have a mortgage—few people could buy a house without one—but how to minimize the weight of that debt. Many people view their home as their biggest investment, hoping that it will appreciate in value and help to finance their retirement.

But the debt issues of homeownership sometimes get overlooked. Taking out a big mortgage in order to buy an expensive house could create a debt burden that you'll regret later. What's more, you might become house poor, meaning that the expenses associated with home- ownership preclude you from spending on other things or, more importantly, saving.

You can measure your mortgage burden by calculating your loan-to-value ratio. Think of the loan-to-value ratio as the percentage of your house that belongs to the mortgage company instead of to you. Suppose that at age 30 you buy a home for $250,000. You make a down payment of $25,000 and take out a 30-year mortgage for $225,000. Your loan-to-value ratio is 225/250, or 90%, because you've paid for only 10% of the house's value. As you make payments over the years, you will steadily build up equity in your home, and your loan-to-value ratio will decline. If your home also grows in value over the years, the ratio will shrink faster. Suppose you still own the house when you're 50 and your remaining mortgage is $125,247, but the house is now worth $350,000. Your loan-to-value ratio is just 36%.

Most homeowners don't worry much about their mortgage debt because they count on their house rising in value over time. It doesn't always work that way. The bursting of the housing bubble in 2007 was one of the key catalysts of the Global Financial Crisis and led to a tidal wave of foreclosures. Here's what happened. Housing prices were on the rise. Relaxed lending standards enabled many individuals to purchase a home, and many overextended themselves. When housing prices then declined dramatically, many homeowners found themselves upside down, meaning their home was valued less than their mortgage. Some had trouble making the monthly mortgage payments; others became forced sellers in a down housing market.

Returning to our example, consider the home you purchased for $250,000 is now worth $175,000, or 128%! With a mortgage of $225,000, your loan-to-ratio is 225/175. Consider a house a place to live, not an investment. If you are fortunate, it will rise in value over time, but don't bank on it.

If you are in a high-risk profession that is subject to industry downturns and periodic layoffs, it is sensible to avoid a heavy mortgage burden because you don't want the fixed cost of a large monthly mortgage payment if you are out of work for a time. But if you have some reasonable level of job security, you may not be as concerned about the size of your mortgage. The point is that you should think about your personal situation before taking on a mortgage or other major debt.