As a Licensed Insolvency Trustee (“LIT”) in Winnipeg, I have recently seen an increase in the number of people I meet earning insufficient income to afford all the costs associated with home ownership.
People say things like “the cost of my mortgage payment and property taxes is less than I would pay for similar rent” so what is the problem?
The problem is that with limited financial income, people fail to realize the additional costs associated with a home. While a home may appreciate in value overtime, if a home isn’t adequately maintained, the value may remain stagnant or actually depreciate over time. Costs that people fail to consider when comparing the cost of home ownership with renting include:
- Increased winter heating costs
- Furnace and air conditioner repair / replacement
- Appliance repair / replacement (washer, dryer, dishwasher, fridge & stove)
- Shingles, windows and doors repair / replacement
- Foundation and / or water line repairs
- Insurance premiums and claims
- Yard maintenance (snow clearing, lawn care and tree removal)
Without adequate resources to finance these costs, people turn to debt to supplement income to make the required payments.
While a consumer proposal or bankruptcy can eliminate the unsecured debt incurred, we are seeing more situations where people need to consider whether keeping a home is a good financial decision in the long run. Without access to credit after filing a consumer proposal or bankruptcy, people will be unable to handle emergency costs incurred with home ownership.
In many instances, people that have taken our advice and either sell their home or allow the bank to foreclose on the realty, thank us for the reduced stress they feel.
The cost of home ownership isn’t simply the mortgage, taxes and insurance payments. A lot more needs to be taken into account.