1 minute read.
The debt load of many Ontarians has swelled over the past five to ten years. We have spent quite a while enjoying low-interest rates and relative ease of borrowing and now, some are ‘up to our eyeballs in debt’! As mortgage renewals are coming due, many people are feeling shocked over the new, higher interest rates, often having to refinance and stretch out their mortgage amortization to 30 years...maybe even for the second time. In fact, according to Stats Canada, lower-income families are in debt approximately $3.33 for every $1 they have earned. As a result of this, many homeowners are now considering downsizing their family homes as a way to manage their household and personal debt. To be honest, it’s not a bad idea. Here are a couple of things to consider before you cash-out and become debt-free, bearing in mind that this requires us to take look inside our spending habits.
- Is it a temporary fix?
- Will downsizing still meet the needs of the family?
This exercise requires you to truly think about your family and differentiate between needs and wants; in other words, what is essential vs what is nice to have. You may think this is easy and obvious, but it’s not. The real estate industry has been enjoying high times for so long that homeowners have assigned unnecessary importance to some items that truly are a luxury (or a want). Can you identify those luxury items? If you feel that you can’t give up some things like a double car garage versus a single, having laundry in the basement rather than the top floor or not having an inside door to the garage then you may want to consider the option of debt management instead of moving. This is definitely the case if you are not prepared to strip away the luxuries (or wants) during your downsize as you won’t be able to see the full financial benefit of moving.
If you have been considering a downsize to manage debt, give us a call before you make any major commitments. We have a lot of experience in this field and would be pleased to help you coordinate a plan that will fit your needs!