Case Study – New Homeowners

Buying a home is the biggest purchase that most of us will ever make. Unfortunately, it can often come with unexpected expenses that send your costs sky-high. The family in this case study ran into this problem – the renovations on their new home had launched them into a debt spiral. We were there to guide them through a debt restructuring process.

Background

This couple moved to Nova Scotia from Ontario in the pursuit of affordable housing prices. They were delighted when they were able to purchase a home within their budget. However, their delight was short-lived. They quickly realized that their lovely new home would need a new roof and a new oil tank before the coming winter. They accessed an unsecured line of credit to pay for both repairs. Their bad luck persisted, though, because both their washer and dryer needed to be replaced that winter. They decided to finance through the appliance store’s credit card. There’s a saying that suggests bad things happen in threes, and that was true for this couple as in the spring they found out that their new home needed a whole new septic system. They accessed another line of credit for this, meaning they now owed $60,000 between two lines of credit. This was on top of the $2000 they had owing to the appliance store at a 19.99% interest rate and balances on their credit cards. Deep in debt, they now were choosing between paying their mortgage and making payments towards their debt. A family member had worked with us in the past and suggested they contact us. Not knowing what to expect, they gave us a call.

The primary concern this couple had in their initial consultation was preserving their credit. This was because based on their experiences over the past year, they wanted to be sure they could access credit if they needed it. What they didn’t realize, though, was that they had missed many credit card payments and had made no payment towards the appliances, so their credit was already being damaged and their debt service ratio would also prevent approval of regular lending products. In their current position they would only be able to access high interest credit products. Our goal is to get our clients to the point that they have dealt with their debt and when ready, they can access credit products that are actually going to help them and not create more debt problems.

As they had just purchased their home a year ago, they had no equity available to them that they might’ve been able to use to get ahead on the debt. After reviewing the other options available to them based on their situation, they chose to file a consumer proposal. A proposal would lift them out of debt but would also allow them to take steps to rebuild their credit while in the proposal.

Results

Their proposal was accepted by their creditors to have them pay back $19,500 of the original $65,000 they were owing. Although their credit was impacted, they were able to start rebuilding their credit while still working on paying off their proposal.

Conclusion

Most Canadians have home ownership on their list of goals, but owning a home brings risks too. Unlike renting, there’s no landlord to deal with any issues that arise with the property. Renovations are costly and are notorious for going over budget. If fixing your home has left you with a mountain of debt, contact us to find out what your options might be.

This article was written by David Moffatt, a Debt Relief Expert. He has helped assist in creating plans that have helped save Nova Scotia residents over $30 million dollars of consumer and tax debt since 2015. We believe that no consumer should have to struggle with the stress of overwhelming debt. Our debt restructuring strategies can help you cut your debt by up to 80%.

If you are struggling with debt please reach out. It hurts to continue to suffer financially. Halifax Debt Freedom services Halifax, Dartmouth, Bedford, Sackville the entirety of HRM, and all of Nova Scotia.