Yes, the mortgage is worth more than the home in my example.
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wrote last edited by [email protected]
Yes, the mortgage is worth more than the home in my example. I guess I shouldn’t have said “(including equity)” or I should have said “my assets and debts”, since to be in that case, I either don’t have equity in the home or have other debts that surpass my equity. The mortgage is $500,000 and the house plus all my other assets and minus all my other debt is worth $400,000.
In your original example though, you weren’t in debt but you had no money to spend, so that’s broke and not in debt.
Personally, I consider being “in debt” to mean having a debt. It wouldn’t matter if the home was worth more than the mortgage, I’m still in debt on that mortgage. If my assets are worth less than my debts, I would call that “insolvent”. But neither of those conditions mean that you’re broke. As long as you have a reliable income stream that can cover your payments on your debts and other expenses, you’re not broke.