# How far can you get in modern America without debt? **URL:** \ **Category:** Great Debates\ **Created:** [April 8, 2017, 9:19am UTC](https://boards.straightdope.com/t/how-far-can-you-get-in-modern-america-without-debt/784047 "2017-04-08T09:19:17Z")\ **Posts on this page:** 20\ **Page:** 4
**Author:** ![Slash1972](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/slash1972/32/6461_2.png) [@Slash1972](https://boards.straightdope.com/u/Slash1972)\ **Post date:** [April 13, 2017, 6:31pm UTC](https://boards.straightdope.com/t/how-far-can-you-get-in-modern-america-without-debt/784047/61 "2017-04-13T18:31:53Z")
> [@clairobscur](#): > > Meanwhile, the renter, paying much less than you Can you explain this part? If I rented my house out right now, the current prevalent rate would be more than double what my mortgage payment is. How would a renter be paying less than me? ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [April 13, 2017, 6:47pm UTC](https://boards.straightdope.com/t/how-far-can-you-get-in-modern-america-without-debt/784047/62 "2017-04-13T18:47:39Z")
> [@Slash1972](#): > > Can you explain this part? If I rented my house out right now, the current prevalent rate would be more than double what my mortgage payment is. How would a renter be paying less than me? Because that’s not the normal market. If it was, people would rush into that market with more rentals. In general, your gross rent is less than your gross mortgage. It is in the net that the difference lies, and there, _in the long term,_ the benefit has been to the home owner. But if you move every year, chasing better jobs, it may well not be. ---
**Author:** ![mazinger\_z](https://avatars.discourse-cdn.com/v4/letter/m/5f9b8f/32.png) [@mazinger\_z](https://boards.straightdope.com/u/mazinger_z)\ **Post date:** [April 13, 2017, 7:49pm UTC](https://boards.straightdope.com/t/how-far-can-you-get-in-modern-america-without-debt/784047/63 "2017-04-13T19:49:25Z")
> [@DrDeth](#): > > Because that’s not the normal market. If it was, people would rush into that market with more rentals. > > In general, your gross rent is less than your gross mortgage. It is in the net that the difference lies, and there, _in the long term,_ the benefit has been to the home owner. But if you move every year, chasing better jobs, it may well not be. I’m not sure I understand this statement. I’ve owned and rented in three cities, SF, Chicago, and NY. Each time, my rent was way more than my mortgage, for the a similarly situated property (condos and townhouses (Chicago)). Granted, I had to put some down payment for each mortgage, but my last two places (Chicago and NY), my rent was $500 difference and then a $1500 difference. In Chicago, I’m not sure if the rent also contained the $260 HOA, but in NY, it didn’t (and that was $350). The reason people don’t rush to the market for more rentals is that there is a high barrier to entry, a spectacular amount of nonsense rules in the market (specifically, NY (e.g., HOAs, realtor fees, broker fees, waiting lists, developer issues, etc.)) to deter renting, and alternative less risky investments (though property seems really good right now) in financial instruments like stocks and bonds), oh and a limited supply of good rental properties. ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [April 13, 2017, 7:54pm UTC](https://boards.straightdope.com/t/how-far-can-you-get-in-modern-america-without-debt/784047/64 "2017-04-13T19:54:39Z")
> [@mazinger\_z](#): > > , oh and a limited supply of good rental properties. Just rent that house. [http://www.mortgagecalculator.org/helpful-advice/rent-or-buy.php](http://www.mortgagecalculator.org/helpful-advice/rent-or-buy.php) \*Renting costs less money. \* Now, again, i am comparing gross vs gross. Not net. ---
**Author:** ![Slash1972](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/slash1972/32/6461_2.png) [@Slash1972](https://boards.straightdope.com/u/Slash1972)\ **Post date:** [April 13, 2017, 8:01pm UTC](https://boards.straightdope.com/t/how-far-can-you-get-in-modern-america-without-debt/784047/65 "2017-04-13T20:01:28Z")
> [@DrDeth](#): > > Because that’s not the normal market. If it was, people would rush into that market with more rentals. In my area, they are, because rents are so high. ---
**Author:** ![Slash1972](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/slash1972/32/6461_2.png) [@Slash1972](https://boards.straightdope.com/u/Slash1972)\ **Post date:** [April 13, 2017, 8:06pm UTC](https://boards.straightdope.com/t/how-far-can-you-get-in-modern-america-without-debt/784047/66 "2017-04-13T20:06:38Z")
> [@DrDeth](#): > > Just rent that house. > [Should I Buy a Home or Rent?](http://www.mortgagecalculator.org/helpful-advice/rent-or-buy.php) > \*Renting costs less money. \* > > Now, again, i am comparing gross vs gross. Not net. What do you mean you are comparing gross vs gross? ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [April 13, 2017, 8:19pm UTC](https://boards.straightdope.com/t/how-far-can-you-get-in-modern-america-without-debt/784047/67 "2017-04-13T20:19:42Z")
> [@Slash1972](#): > > What do you mean you are comparing gross vs gross? In general, your gross rent is less than your gross mortgage. It is in the net that the difference lies, and there, in the long term, the benefit has been to the home owner. ---
**Author:** ![TonySinclair](https://avatars.discourse-cdn.com/v4/letter/t/49beb7/32.png) [@TonySinclair](https://boards.straightdope.com/u/TonySinclair)\ **Post date:** [April 13, 2017, 8:24pm UTC](https://boards.straightdope.com/t/how-far-can-you-get-in-modern-america-without-debt/784047/68 "2017-04-13T20:24:36Z")
> [@Little\_Nemo](#): > > I’ve done pretty well. > > I went to college back when it was still relatively affordable. My family and I were able to pay for it without exorbitant loans. > > I borrowed to buy my first three cars. But ever since then, I’ve paid for them up front. > > I borrowed money to buy my first computer. > > But I literally have not borrowed any money in over twenty years. > > The downside of this is I have no credit history. I was planning on buying a house and the banker seemed shocked when I told him my background. He recovered somewhat and assured me it wouldn’t impossible for me to get a mortgage. But I noticed he never got back to me. Similar story for me. I have a high credit score because I pay off my credit cards every month, but I have no income because I’m retired, and I’ve declined to take Social Security yet. So even though I have enough money in the bank to buy 30 cars like the one I bought last year, I couldn’t get the zero-interest for one year they offered. Heck, I even got turned down for the Amazon credit card that they still offer every time I buy something there. So yes, you can go through life debt-free (other than credit card purchases that I’ve paid off every month, I’ve paid cash for everything for decades, including several cars and homes), but if you do, and you’re retired, you can’t get credit. ---
**Author:** ![Inferior\_Desecrator](https://avatars.discourse-cdn.com/v4/letter/i/9f8e36/32.png) [@Inferior\_Desecrator](https://boards.straightdope.com/u/Inferior_Desecrator)\ **Post date:** [April 16, 2017, 11:24pm UTC](https://boards.straightdope.com/t/how-far-can-you-get-in-modern-america-without-debt/784047/69 "2017-04-16T23:24:04Z")
> [@TonySinclair](#): > > So yes, you can go through life debt-free (other than credit card purchases that I’ve paid off every month, I’ve paid cash for everything for decades, including several cars and homes), but if you do, and you’re retired, you can’t get credit. Hey, back on track of the OP. What am I missing here? If you have assets (i.e. paid-for house), there is no problem whatsoever getting credit in Canada. Banks here will always loan “secured” lines of credit. (A reverse mortgage (CHIP in Canada) for example). Credit score is irrelevant. ---
**Author:** ![TonySinclair](https://avatars.discourse-cdn.com/v4/letter/t/49beb7/32.png) [@TonySinclair](https://boards.straightdope.com/u/TonySinclair)\ **Post date:** [April 17, 2017, 2:12am UTC](https://boards.straightdope.com/t/how-far-can-you-get-in-modern-america-without-debt/784047/70 "2017-04-17T02:12:02Z")
> [@Inferior\_Desecrator](#): > > Hey, back on track of the OP. > > What am I missing here? If you have assets (i.e. paid-for house), there is no problem whatsoever getting credit in Canada. Banks here will always loan “secured” lines of credit. (A reverse mortgage (CHIP in Canada) for example). Credit score is irrelevant. When I said I can’t get credit, I was imprecise. Although I haven’t looked into it, I’m pretty sure I could get a reverse mortgage. But that’s a loan that’s specifically designed to be based on assets. The fact remains that I was turned down for the Amazon card and a car dealership promotion, which almost anybody with zero net worth but a $25K annual salary would have been approved for, even though I have a seven figure net worth and a credit score well over 800. They simply stop looking once they see that I have no income. Makes no sense to me at all, except that it’s cheaper and faster for the loan company to go down a checklist than to actually use some judgement and common sense in evaluating someone. So whatever you’re missing, I’m missing it, too. ---
**Author:** ![LSLGuy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lslguy/32/5813_2.png) [@LSLGuy](https://boards.straightdope.com/u/LSLGuy)\ **Post date:** [April 17, 2017, 1:01pm UTC](https://boards.straightdope.com/t/how-far-can-you-get-in-modern-america-without-debt/784047/71 "2017-04-17T13:01:16Z")
> [@TonySinclair](#): > > When I said I can’t get credit, I was imprecise. Although I haven’t looked into it, I’m pretty sure I could get a reverse mortgage. But that’s a loan that’s specifically designed to be based on assets. > > The fact remains that I was turned down for the Amazon card and a car dealership promotion, which almost anybody with zero net worth but a $25K annual salary would have been approved for, even though I have a seven figure net worth and a credit score well over 800. They simply stop looking once they see that I have no income. > > Makes no sense to me at all, except that it’s cheaper and faster for the loan company to go down a checklist than to actually use some judgement and common sense in evaluating someone. > > So whatever you’re missing, I’m missing it, too. We recently went around a similar bush with my aged MIL when she wanted to rent a new apartment. At first the lack of W-2 income was a big deal. Then we pointed out her dividend and interest income was 5x the rent. “Oh, that changes everything” was the response. The point being that you’re not zero income. You’re zero W-2. You may have to jump through an extra hoop to prove, e.g. via tax returns or 1099s, that you have non-W-2 income. But you’ve got some. Unless you’ve truly put 100% of it in passbook savings and are simply withdrawing principal to live. ---
**Author:** ![spifflog](https://avatars.discourse-cdn.com/v4/letter/s/c5a1d2/32.png) [@spifflog](https://boards.straightdope.com/u/spifflog)\ **Post date:** [April 17, 2017, 1:20pm UTC](https://boards.straightdope.com/t/how-far-can-you-get-in-modern-america-without-debt/784047/72 "2017-04-17T13:20:20Z")
> [@TonySinclair](#): > > When I said I can’t get credit, I was imprecise. Although I haven’t looked into it, I’m pretty sure I could get a reverse mortgage. But that’s a loan that’s specifically designed to be based on assets. > > The fact remains that I was turned down for the Amazon card and a car dealership promotion, which almost anybody with zero net worth but a $25K annual salary would have been approved for, even though I have a seven figure net worth and a credit score well over 800. They simply stop looking once they see that I have no income. > > Makes no sense to me at all, except that it’s cheaper and faster for the loan company to go down a checklist than to actually use some judgement and common sense in evaluating someone. > > So whatever you’re missing, I’m missing it, too. Keep in mind that getting or not getting a credit card isn’t an indication of your credit score. I was recently turned down for a credit card that I applied for at a football game. (Long stupid story that involved the need for a free tee shirt that was probably valued at $5.) I was surprised, but not upset that I was turned down and called the company and asked why. After a long conversation, I was told that I hadn’t paid interest on my two credit cards in 30 years (always paid on time), and the credit card company didn’t think they were going to make any money off me so they turned me down. ---
**Author:** ![Slash1972](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/slash1972/32/6461_2.png) [@Slash1972](https://boards.straightdope.com/u/Slash1972)\ **Post date:** [April 17, 2017, 4:47pm UTC](https://boards.straightdope.com/t/how-far-can-you-get-in-modern-america-without-debt/784047/73 "2017-04-17T16:47:46Z")
> [@DrDeth](#): > > In general, your gross rent is less than your gross mortgage. It is in the net that the difference lies, and there, in the long term, the benefit has been to the home owner. Sorry, I must be missing some key assumption you are using or something, because I still don’t understand what you are trying to say here. Can you use some numbers or something? ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [April 17, 2017, 4:53pm UTC](https://boards.straightdope.com/t/how-far-can-you-get-in-modern-america-without-debt/784047/74 "2017-04-17T16:53:38Z")
> [@Slash1972](#): > > Sorry, I must be missing some key assumption you are using or something, because I still don’t understand what you are trying to say here. Can you use some numbers or something? Ok, let us say you have a house. Rent = 2000 Mortgage= 2000 + 500 property taxes= 2500 Rent is less, gross. But then 2000 of your mortgage + taxes is deductible, saving you $600. Mortgage= 2000 + 500 property taxes (tax saving) = $1900 and that doesnt include the fact that the $500 a month principal you get back when you sell the house. ---
**Author:** ![Slash1972](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/slash1972/32/6461_2.png) [@Slash1972](https://boards.straightdope.com/u/Slash1972)\ **Post date:** [April 17, 2017, 4:58pm UTC](https://boards.straightdope.com/t/how-far-can-you-get-in-modern-america-without-debt/784047/75 "2017-04-17T16:58:01Z")
> [@DrDeth](#): > > Ok, let us say you have a house. > > Rent = 2000 > Mortgage= 2000 + 500 property taxes= 2500 > > Rent is less, gross. > > But then 2000 of your mortgage + taxes is deductible, saving you $600. > > Mortgage= 2000 + 500 property taxes (tax saving) = $1900 > > and that doesnt include the fact that the $500 a month principal you get back when you sell the house. OK thanks. I guess the assumption you are making is that someone would rent their house for less than their mortgage payments. And by “Mortgage Payment” I include principal, interest, taxes and insurance since that is what comprises MY mortgage payment. ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [April 17, 2017, 5:42pm UTC](https://boards.straightdope.com/t/how-far-can-you-get-in-modern-america-without-debt/784047/76 "2017-04-17T17:42:27Z")
> [@Slash1972](#): > > OK thanks. I guess the assumption you are making is that someone would rent their house for less than their mortgage payments. And by “Mortgage Payment” I include principal, interest, taxes and insurance since that is what comprises MY mortgage payment. No, since there is not much _positive cash flow_ in renting one house, but remember tax benefits. When you rent you also get to deduct depreciation. ---
**Author:** ![Slash1972](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/slash1972/32/6461_2.png) [@Slash1972](https://boards.straightdope.com/u/Slash1972)\ **Post date:** [April 17, 2017, 6:18pm UTC](https://boards.straightdope.com/t/how-far-can-you-get-in-modern-america-without-debt/784047/77 "2017-04-17T18:18:20Z")
Thanks for the info you’ve provided, but I guess I still am not clear on what you are trying to say, and I don’t really care that much about it (the topic, not your info - not trying to slight you) ---
**Author:** ![TonySinclair](https://avatars.discourse-cdn.com/v4/letter/t/49beb7/32.png) [@TonySinclair](https://boards.straightdope.com/u/TonySinclair)\ **Post date:** [April 17, 2017, 7:11pm UTC](https://boards.straightdope.com/t/how-far-can-you-get-in-modern-america-without-debt/784047/78 "2017-04-17T19:11:04Z")
> [@LSLGuy](#): > > The point being that you’re not zero income. You’re zero W-2. You may have to jump through an extra hoop to prove, e.g. via tax returns or 1099s, that you have non-W-2 income. But you’ve got some. Unless you’ve truly put 100% of it in passbook savings and are simply withdrawing principal to live. I’ve put most of it in IRAs, so the interest isn’t taxable until I withdraw it. Up until last year, I was careful to withdraw an amount small enough that I didn’t have to file a tax return. ---
**Author:** ![rat\_avatar](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/rat_avatar/32/255_2.png) [@rat\_avatar](https://boards.straightdope.com/u/rat_avatar)\ **Post date:** [April 17, 2017, 8:41pm UTC](https://boards.straightdope.com/t/how-far-can-you-get-in-modern-america-without-debt/784047/79 "2017-04-17T20:41:33Z")
> [@DrDeth](#): > > Ok, let us say you have a house. > > Rent = 2000 > Mortgage= 2000 + 500 property taxes= 2500 > > Rent is less, gross. > > But then 2000 of your mortgage + taxes is deductible, saving you $600. > > Mortgage= 2000 + 500 property taxes (tax saving) = $1900 > > and that doesnt include the fact that the $500 a month principal you get back when you sell the house. In many places this is not a fair comparison, and the historical ratios no longer apply. As an Example I currently pay $1350 a month in rent and at 3.92% House value $558,924 20% Down payment $111,784 Monthly Payment $2,113 Month before the interest payment is less than the rent differential June 2036, equivalent balance with 3% return = $454,025.70, 6% = $722,565 Total interest payments over a 30 years = $313,951.76 Or I could take that Down payment and buy a house for cash in a more reasonable place to retire and rent it out over those 20 years. While there are lots of variables that complicate and benefit both sides home ownership i a lifestyle choice and outside of a very very tiny window that is not equal to a life time a pretty marginal investment. That said, I grew up poor and didn’t have any credit until my 30’s. Ironically being able to pay your bills with cash or living within your means is the worst thing you can do to your credit score. I had to get a very expensive car loan and credit cards to start building mine. In fact I had friends that had declared bankruptcy and they had easier access to credit after two years than I did for 5 years of building credit. Car loans, home ownership and student loans are not needed for success but they can be a tool to reach it. (well car loans are typically bad for your net worth) ---
**Author:** ![Inferior\_Desecrator](https://avatars.discourse-cdn.com/v4/letter/i/9f8e36/32.png) [@Inferior\_Desecrator](https://boards.straightdope.com/u/Inferior_Desecrator)\ **Post date:** [April 17, 2017, 11:45pm UTC](https://boards.straightdope.com/t/how-far-can-you-get-in-modern-america-without-debt/784047/80 "2017-04-17T23:45:17Z")
> [@TonySinclair](#): > > When I said I can’t get credit, I was imprecise. > > \ > > So whatever you’re missing, I’m missing it, too. 😉 That makes sense of it 😃 [Previous page](https://boards.straightdope.com/t/how-far-can-you-get-in-modern-america-without-debt/784047.md?page=3)