While homeownership was once viewed as a path to wealth and financial stability, some homeowners are feeling trapped by homes they can no longer afford.
Take Mendy, for example. This 35-year-old from Canada has a total of $1.8 million in debt, which includes his family home and a triplex he was renting out in Montreal. Now, with a second child on the way, Mendy’s feeling downright anxious about his financial situation.
When Mendy called into The Ramsey Show for advice, host Dave Ramsey was rather blunt, telling Mendy that he and his wife need to make some serious changes before it all burns to the ground.
Struggling under the weight of debt
As Mendy explained on the show, he owes $590,000 on the family home, which is worth $750,000. He also owes $680,000 on the triplex, worth about $850,000, which he’s listed for sale (so far, there haven’t been any takers).
On top of that, he owes roughly $70,000 on each of his two electric vehicles, along with $35,000 in student loan and credit card debt, and another $350,000 in personal debt (mainly to his cousin, who lent him money for a down payment and for renovations to both properties). Mendy’s total household income is around $120,000 per year before taxes.
“I had my ‘a-ha’ moment when I saw $22,000 going out in one month after doing a budget and I don’t know what exactly to do,” Mendy shared with Ramsey and his co-host, Rachel Cruze. “I cut out everything from potato chips to haircuts, literally anything I could to curb the debt.”
Taking on more work isn’t exactly an option, either. As he explained on the show, Mendy is bipolar and his doctor has told him he needs to maintain a healthy work/life balance. And making matters worse, his wife is about to go on maternity leave.
“The answer to getting rid of this anxiety is getting rid of all the crap and the debt associated with it,” said Ramsey. That starts with getting rid of the EVs and replacing them with cheap cars, “like, $5,000 cars,” said Ramsey.
While Mendy has given up on being a landlord and is trying to sell the triplex, “that thing’s got to be priced in such a way that your real estate agent can sell it and get it gone,” said Ramsey. If Mendy can make a profit of $200K to $250K on the triplex, he could then use that to pay off a chunk of his $350K personal debt.
Ramsey also says getting Mendy’s wife on board will require a serious conversation.
“The house is on fire, darling,” said Ramsey, assuming the role of Mendy in this conversation with his wife. “You get to decide with me if we’re going to let the house burn down or are we going to do something to put it out?”
Why homeownership isn’t a safety net anymore
For decades, owning a home has been considered the ultimate financial security blanket, offering a path to future wealth. But these days, for many middle-class families, homeownership can mask financial instability rather than solve it.
As a result, many Canadians currently find themselves in a “homeownership trap,” where the financial burden of owning a home eclipses other financial goals and erodes their quality of life.
Priced annually in October, last year, property taxes and other special charges spiked 6.0% on a year-over-year basis, compared with a 4.9% increase seen in October 2023, according to Statistics Canada. "This was the highest yearly increase since 1992," the office revealed.
Homeowners insurance is expected to increase 5.28% in 2025, with Alberta leading the nation with a 9.07% year-over-year increase, according a study from insurance comparison platform My Choice.
As a result, an increasing number of homeowners may feel cost burdened, meaning they spend more than 30% of their household income on housing and utilities.
How to avoid falling into a money pit
If you’re planning to buy a house, you’ll want to make sure you’re budgeting for everything, not just the purchase price. Consider property taxes, insurance, utilities, repairs and ongoing maintenance. If you have a variable-rate mortgage, you’ll also need to have room in your budget for payments with higher interest rates.
Once you tally up these costs, if the total is well above 30% of your household income, you may want to consider other options, such as buying a smaller, less expensive home or even co-buying with friends or family.
You’ll also want to shop around for the best mortgage rate you can find, since the current rate averages around 4% for a five year fixed-rate mortgage. To negotiate a better rate with lenders, it helps to have a strong credit score and low debt-to-income ratio.
If you can afford a 20% down payment, then you can avoid paying for Canada Mortgage and Housing Corporation (CMHC) insurance each month on a conventional loan.
If you’re already living in a money pit, you could try to renegotiate your mortgage to lower your monthly payments. For example, you could consider a loan modification (changing the terms of your mortgage) or refinancing (replacing your existing mortgage with one that has better terms).
For those living in a home they can no longer afford, like Mendy, the solution could require a more radical change — like finding a roommate, downsizing to a smaller home or moving to a less expensive neighborhood. And, like Ramsey said, “quit buying crap you can’t afford.”
Sources
1. Statistics Canada: Consumer Price Index, October 2024 (Nov 19, 2024)
2. My Choice: Home Insurance Predictions for 2025, by Vitalii Starov (Mar 4, 2025)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
