Borrowing to Buy the Family Home! Good Debt or Bad Debt?

Borrowing to Buy the Family Home! Good Debt or Bad Debt? – http://wp.me/p83WZu-2f

Good debt right?

It’s the family home! The Australian dream! I will live there for years, raise a family and provide security. Better to be paying off my own house, then paying off someone’s investment. These are just some thought that come to mind. However, does that make the family mortgage good debt. No, they just justify the debt in our mind. The fact is the family home can be good debt or bad debt. That choice is yours.

The key to making the family mortgage good debt, is capital growth.

The fact is there are two ways to make money on property, rental income and capital growth.Your family will occupied your family home, so there is no direct rental income. This leaves capital growth, however the good news is you have one big advantage on your side. Time.

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The property has time to grow in value. Buying a family home with the intention of living in one place for long period of time allows for the population and economy to grow, which are two key factors for property growth. More people means more demand for houses, more demand equals higher price. A larger economy means higher income earners, higher income earners equals more people with the ability to pay a higher price. Time also lets compounding to take full effect. The ability to hold a growth asset for a long period of time lets the year to year growth compound which creates real wealth. To achieve year to year growth requires a good location.

What is a good location for my family home? Well, take a minute to think about what do you need nearby? Remember you are intending on living in your family home for a long period of time.
Weather you prefer a city, country or beach lifestyle there are a few services that we all look for. Schools, hospitals, Jobs, shops, public transport, and entertainment/leisure. These common services are also what drive property growth and declines.

Putting this all together. Entering into a mortgage to purchase a family home can be classed as good debt. Providing the property is near a location that has growing common services, and buying with the intention of living in one place for a long period of time.

A.W.

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