All Topics / Finance / How much is too much debt?
I was only discussing this subject with a friend who has substantial assets (house $ 4 M with no debt and $ 7 M debt against some blocks of units).
He suddenly has realised that he has left his run to protect his assets a bit late.
He came up with another possible solution. Divorce your wife and the house can be transferred into the wife’s name without incurring stampduty.
Bang, problem solved.
Solved ? I still see some problems however.
Pisces
Monopoly said :
“It’s not how much debt you have, it how much your assets are worth & whether you can repay the debt.”
I would think it would sound better if that statement were to read :“It’s not how much debt you have, it how much your assets are worth in a forced sale”
When everything is hunky dory there isn’t any problem. It is when one runs into financial strife that problems may arise.
At least I imagine that Jo’s question, which started off this thread, referred to the time when one may run into a financial hardship situation.
Personally I believe that people who gear as high as 95% (or heeavens forbid) 100% loans are walking a tightrobe. Anmy bit if wind will make one fall.
Yes, I can understand that someone just starting out may be highly geared.
The question however is ‘At what stage should one reduce one’s commitments ? (so as to provide a higher margin of safety)’
Pisces
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