Your Debt Solutions Experts
BDO St Johns

5 Springdale St. Suite 1000
St. John’s, Newfoundland
A1E 0E4

(855) 839-2823

Debt Advice: What Will You Give Up to Own a Home?

Millennials are in a tough place when it comes to home ownership. High housing prices combined with financial challenges like heavy student debt loads, high living costs and flat wages aren’t making it any easier. If you’re struggling to get into the housing market and looking for advice on how to deal with debt and achieve your financial goals, read on.

Our 2018 Affordability Index told us that many millennials are finding it hard to get by, never mind saving money. Those who do manage to save and pay down debt in order to prepare for home ownership are faced with the risk that they’ll become “house poor” — meaning a large chunk of their monthly earnings will go toward the mortgage, maintenance and utilities.

If you want to buy and still be able to save and pay your debts, you’re going to have to figure out what you can do to make that happen. You may have to make significant compromises. Here are a few things to consider first:

Is moving an option?

Housing prices are higher in larger urban centres than in small cities and towns. If moving is an option for you and your partner, life in a smaller place has the potential to be much more affordable for you.

Living farther from your job will mean a longer commute. If you or your partner need to be in St. John’s to perform your work, explore communities closer to the city that will make commuting and home ownership an affordable option.

Or you might consider telecommuting. Studies have shown that companies actually benefit from allowing employees to telecommute because it increases productivity and employee retention. If that sounds appealing to you, consider discussing telecommuting with your employer. The benefits could be great for both of you if you can make it work.

Are you willing to be house poor for a while?

Moving isn’t for everyone. You might have friends or family to consider, or you may just prefer an urban lifestyle. While the cost of housing in St. John’s isn’t as high as it in other cities, it can still be a challenge for millennials to pay their mortgages. The best debt advice is to approach a potential home purchase knowing what to expect.

Even if your monthly mortgage payment is equal to what you were paying in rent, owning a home costs more than renting. This calculator can help you determine the actual cost of home ownership.

If you anticipate that your first few years as a homeowner will be lean, you may need to drastically tighten up your budget, temporarily reduce or eliminate spending on extras, and keep a close eye on where your money is going each month. Your ultimate goal is to be able to continue to add to your savings and reduce your debt without turning to credit to make up for any shortfall.

Think about your wants and needs. Many of the things we spend money on aren’t as important to us as we thought, once we give it a bit more thought. When you recognize what you don’t need, you free yourself from the trap of consumerism and gain control over your money.

Rachel Jonat, The Minimalist Mom blogger, talks about her journey from consumerism towards minimalism in this blog. She just might inspire you to look more closely at what you really need.

It’s not a good idea to buy a house if you’re going to have to be house poor for years. It’s a stressful way to live and you won’t be able to keep it up forever. We all have to give into our “wants” at some point if we want to enjoy life.

The best debt advice is to take a pause while you look at the biggest purchase of your life. Becoming a homeowner when you aren’t sure you can afford all it entails leads to taking on debt, sometimes every month, until it becomes too much to carry. The peace of mind that comes with living within your means will be well worth it.

What debt advice do you have for your fellow millennials? Tell us your story on Twitter. #LeaveDebtBehind #Rent #DebtAdvice

Book a Free Consultation