Lots of people dream about owning a home, but many encounter a number of barriers to homeownership in their pursuit of that dream, particularly if they are dealing with debt.
- 53 per cent say that accumulating savings for the down payment is the biggest obstacle that they face
- 45 per cent find it difficult to manage competing financial priorities, like saving paying down debt
- 46 per cent are worried about rising real estate prices
“Home ownership is an excellent financial goal. However, if you are concerned with the obligations associated with homeownership, you are wise to take a step back and re-evaluate your plan.,” says Jeff Schwartz, executive director, Consolidated Credit Counseling Services of Canada.
“Don’t become discouraged by potential barriers to homeownership. Rather, address them individually as a means to setting yourself up for responsible, profitable home ownership, instead of becoming more vulnerable with more debt.”
Don’t underestimate the down payment
Your down payment is one of your most strategic tools to keep your debt down. Don’t use your down payment as a method to increase your spending budget, which is a common practice in some cities like Toronto and Vancouver, where housing prices are rising rapidly. Having a larger down payment will reduce your overall debt and your overall costs, including interest charges and mortgage insurance fees, which can be substantial.
When compiling your housing wish list, you shouldn’t start with location, number of bedrooms and types of finishes. You need to start with your budget and a strategy for the down payment.
The savings challenge
While you may feel like you could get much further ahead by directing your available income towards debt and then dealing with savings later, you can actually accomplish both at the same time. In doing so, you are going to build your net worth more quickly.
It’s time to set up a budget with an eye to savings. If you’ve got a five-year plan to buy a house, you’ve got to earmark a certain amount of your budget towards savings every month. Tweak your budget and cut back where you can. Every little bit helps.
Don’t forget that you can do double duty with your RRSP for your house down payment as well.
Resist the urgency
There is a lot of pressure in some housing markets right now to get in at any cost, because prices are increasing so rapidly. Potential homebuyers are making emotional purchase decisions, for fear they will miss out. They are justifying spending beyond their means as a necessary evil of homeownership. Yes, it is a risky move, but it makes sense for the long term, right? Nope.
All spending beyond your means does is jack up your debt. The thinking that you’ll make a huge profit on your housing because prices keep on rising is flawed. It’s all about where and when you get into the market and how much debt you are carrying to do so. If you are mortgaged to the max, and prices pull back, even a little, then your house of dreams is a house of cards.
Is home ownership on your financial radar, but feel like your debt load might be your obstacle? You’ve got to take steps to pay it down so that you can move in to your financial future. Contact one of our trained credit counsellors at or visit online for a debt analysis.