In North American culture, home ownership is seen as a rite of passage. It’s a goal that many strive for, even though it doesn’t necessarily make sense for everyone. It’s true that a mortgage is considered “good debt” when compared to other consumer expenses, but it’s still debt.
Some lenders will extend a mortgage loan to people with a poor credit history, though it comes at the cost of higher interest rates and tougher financing terms. Maybe the question shouldn’t be CAN you get a mortgage with bad credit, but rather SHOULD you apply for one when you’re already struggling with debt? There are a lot of good reasons to consider holding off on home ownership.
Don’t Underestimate the Power of Mobility
When you own a home, you are obligated to pay for it whether or not you or someone else lives in it. As many of the workers in Canada’s oil patch recently learned, unfortunately, in the event of mass layoffs and work shortages, the bills are still due. Sure, the lender has the asset of the home in their back pocket if you’re unable to make the payments, but if the mortgage exceeds the value of the home, you still owe the difference.
Home ownership is the ultimate act of “putting down roots” but when you’re struggling with debt, the ability to move to where the work is with relative ease is a significant benefit.
Unexpected Expenses of Home Ownership
When you’re planning to buy a home, you can get a good sense of your household expenses. Mortgage, property taxes, insurance and utility costs are easy to determine and understand. You can even set aside a designated amount each month for maintenance and emergencies. However, you may not be prepared for just how expensive emergency home repairs can be.
For example, the average cost to replace a furnace in Canada is about $4000, and a roof replacement is even more. Now imagine learning you need to replace both in the dead of winter. That would be a financial hardship for someone with excellent credit, but for someone who is already tapped out, it may be insurmountable.
Consider All Options Carefully
In spite of what we think about the importance of owning a home, when you’re trying to improve your credit, it can be wise to let someone else take on the financial risk of home ownership. The option to buy a house will always be there later.
We can help you learn strategies to reach all your financial goals, including improving your credit so you can become a homeowner with good credit one day.