Understanding debt
The ‘Better explained’ blog has a great article on ‘understanding debt’:
http://betterexplained.com/articles/understanding-debt-risk-and-leverage/
Some highlights from the article:
Getting a mortgage: As we saw, borrowing money to buy a house is a form of leverage. With 5% down (a 20x gearing ratio), your house only needs to drop by 5% to lose money. With 0% down, your house has to drop… wait for it… any amount for you to lose! And after your house is worth less than your mortgage, there’s little incentive to pay it off (better to go bankrupt, depending on the debt).
