Is Mortgage Debt “Good Debt”? Really?

The Canadian Association of Accredited Mortgage Professionals (CAAMP) does a great job of bringing together information about the Canadian economy and housing market. Recently they issued their 2013 Mortgage Insights report from Maritz Research (attached below) that highlighted the findings from their fall 2013 survey. I found some of the stats fascinating, I thought this one was worth having a conversation about.

80% of Canadians consider debt used to purchase a home "Good Debt".

Which got me thinking... is it possible for debt to good? Is this just an excuse for our current obsession with debt? I mean the average Canadian does owe 164% of their annual income (2013). So, is "good debt" something we allow ourselves to believe in so we can not feel bad about borrowing money and perhaps avoid good personal financial management? At very least I am sure we can all agree that consumer debt is not a good idea. I caught up with Gord McCallum; president of First Foundation, and I liked what he had to say on the matter of mortgage debt being "good debt".

"A mortgage allows consumers to leverage OPM - other people's money - to purchase an asset that would otherwise take decades to save for themselves."
Gord McCallum

Gord goes on to say "Waiting to purchase by saving enough to pay cash would deprive the purchaser of the benefits of asset appreciation, which in the long run, helps to offset the interest the buyer pays." And when I questioned him on the idea of a mortgage being an asset, he responded with "A house, if properly maintained, and marketable, can be an asset that is relatively liquid whose equity can be converted into cash at a later date." And to that I would only add... and it is a great place to live.

I guess this is a popular opinion in Canada as the report also indicated that...

84% of Canadians say that owning real estate is a good long term investment.

I posed the same question on Twitter and got some interesting responses. I agree that "safe debt" might be a better discriptive term than "good debt".

My Thoughts

Obviously a mortgage is simply a vehicle that allows you to own a home sooner than renting and saving up to purchase a property with cash. I believe that mortgage debt should be considered good debt when you are living within your means. Of course there is a fine line between reasonable accommodation and living extravagantly, however that is not my place to judge. There are rules in place in Canada that determine what someone can qualify for in a mortgage and they serve as reasonable guidelines in mortgage qualification.

Actually Gord and I had a conversation a while back about mortgage qualification vs mortgage affordability. You can watch that video here.

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