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It’s important to understand debts and how they accrue if you are to achieve a strong financial footing for the future. Our team at MINCOM Island City Realty Inc. works with individuals across the Brockville real estate market to help them understand the process of managing their debt effectively. Within this new post, our Brockville real estate team will explain the differences between household debt and mortgage debt.
Mortgage-Backed by a Tangible Asset
One of the major differences between household debt and mortgage debt is that your mortgage is backed by a tangible asset – your house. If you have a $500,000 mortgage secured against your home, and you paid a 20% down payment for the property, your mortgage will be insured by the CMHC. This insurance means that, if you are unable to make the payments effectively, you have some protection against mounting debt and the accrued interest.
Consumer Debt Accrues with Little Tangible Value
Consumer debt or household debt is a significant problem in Canada. Many people are now choosing to pay for products such as electronics, furniture, and other household items on their credit card. This has sparked a significant trend across the country, and Canada is now one of the most indebted western nations on a per capita basis. Thousands of Canadians are struggling with credit card debt, and have little to show for it but a new item to use in the home.
Focus on Building Equity
The difference between consumer debt and mortgage debt, then, is clear. Those who own Brockville real estate will find they can use their money more effectively by paying down their mortgage and building equity in their home, a tangible asset with significant income potential for the future. It’s important to take a pragmatic approach to this process, however. If you have significant household debt already, you’re far better to start paying off any high-interest loans now than putting more than the monthly amount into your mortgage.
Consumer debt is a common problem for Canadians, but with just a little more knowledge, you can build an understanding of the techniques to reduce debt problems and secure a healthy financial future. To learn more about this topic or any of the trends in the Brockville real estate marketplace, call our real estate team today.