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| Debt Disaster Relief E-Book |
| It used to be that the banks and lending companies determined how much debt was too much in order to get a home loan. Many years ago the ratio was 30% debt to income ratio. This was considered high at the time and no more than 30% of your income could be attributed to a mortgage payment and combined other debt. Now ratios can go as high as 50% to 55% and still be approved for a home loan with good credit.
With consumer debt at an all time high, lenders are now forced to be more creative in their lending practices. In the last five years, we have seen interest only and Adjustable Rate Mortgages (ARM) increase in popularity. Without these, many consumers would not be able to get financed for homes based on the original criteria the lending companies set forth. Now we are seeing a rash of home foreclosures and this will only continue as the ARM loans skyrocket consumer payments. But as far as individuals are concerned, no debt is good. Having a bill guarantees you will have to work for that many more days. And it is not making you any money, only costing you. Most people in the course of their lifetime will always have at least one debt and that is their house. Imagine if you didn�t have a house payment? Having zero debt is the best possible position you can be in. The trend in the future will be to live debt-free. You will see a rise in the number of people moving away from the large cities to make their dollar go farther in smaller communities. One reason many people say they carry debt is for tax reasons. Being able to take write-offs regarding home mortgage interest makes it advantageous to keep upgrading homes in parallel with salary increases. But is this really advantageous? The best way to live life is to keep things simple. Looking for ways to take tax write-offs can end up costing you more in the long run. You may spend more money expecting the write-off. In the case of upgrading houses in conjunction with salary increases, the more money you make the more you will be taxed and the more write-offs you will have to look for. Keeping your expenses down means you can make less money to support yourself and your family, paying less taxes in the process. Being able to live a nice life in a lower tax bracket saves you money and time upfront. A good rule of thumb is the less debt you have the better position you are in. The goal in life is to make yourself rich not the banks! |
| How much debt is too much? |