Home Ownership - Why Does it Cause Financial Problems?

	Home Ownership: Why Does it Cause Financial Problems - Money Problems Radio Show (Opens in a new window. Optimized for Windows Media Player 6.4 and later versions.)
Originally aired on October 29, 2005.

Show Topic:

House prices do not always go up, and it costs more to own a house than you may think. As a result, many Canadians find themselves getting into financial problems in part because of home ownership.

Guests:

Douglas Hoyes and Ted Michalos are the founders of Hoyes, Michalos & Associates Inc, one of Ontario's leading personal insolvency firms. They emphasize a "fresh start" when dealing with money problems. They can be reached at www.hoyes.com or, in Ontario, at 310-PLAN (no area code required).

Show Summary:

First, it costs more to own a home than you may realize. Everyone expects to make mortgage payments, but we often forget about:

	Property taxes
	Utilities (costs are higher for a bigger house than for your small apartment)
	Maintenance (if the washing machine breaks, you have to fix it)
	Furniture (you now need more furniture than you did for your small house)

Typically, the people with home-related financial problems that we meet bought a house one-to-two years ago. They had a small down payment, and used their “don't pay a cent event card” to buy the furniture. Now, the furniture bill is due, they had to replace the furnace, and cannot afford all the payments.

People get into these problems because no-one has any incentive to tell you to NOT buy a house:

	Real estate agents earn a commission on the sale
	Lenders make money on the mortgage
	Retailers make money on all the stuff they sell you for your home

As we have discussed on previous shows, there are options when you are having money problems. If you have equity built up in your home, but still have more debt than you can handle, a consumer proposal may be the perfect solution to get you out of debt and, still, allow you to keep your house.

You have options, so we recommend you contact one of our bankruptcy experts for advice on your situation.

Question of the Week:

Q. We bought our house two years ago with a small down payment. It's gone up a bit in value, but we have used our credit cards to buy furniture and do some unanticipated repairs, and now we are having trouble making the payments on our credit cards. We don't want to lose our house. What can we do?

A. Your first option is to work out a debt repayment plan on your own to pay off the debts by cutting your living expenses and increasing your income. At the same time you may try to get a debt consolidation loan. Because you own a home, you may be able to get a second mortgage and use that money, at a lower interest rate, to repay your higher interest rate credit cards and other debts.

Non-profit credit counsellors may be able to help you file a Debt Management Plan. You pay your debts in full over a two to five year period, and the creditors agree to waive any further interest owing.

If you have equity in your house, you could file a consumer proposal. This is a great way to negotiate a settlement with your creditors: in most cases you end up paying less than the full amount owing, and you can keep your house.

If no other option works, bankruptcy is the final option. It is possible to keep your house even after you file a bankruptcy, but expert advice is required.

Don't let your Money Problems overwhelm you; contact a bankruptcy expert today for more information on how to solve your financial problems caused by home ownership.