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How to Buy a First Home Even If You Have Consumer Debt

Is your consumer debt holding you back from getting into the housing market? You may not have to give up on your dream of home ownership if you just start thinking creatively.

Yes, London is experiencing a housing shortage, resulting in higher-than-expected prices. A recent City of London report states that 14 per cent of all households are considered house poor — which means that your housing costs (mortgage, property taxes, upkeep, utilities, etc.) leave you without necessary funds for emergencies, retirement savings and even basic expenses.

That’s a situation you don’t want for yourself, especially if you’re carrying consumer debt. So how do you enter a tight housing market while still maintaining the ability to pay off your debt? Here are a few creative solutions.

Co-owning can help you manage the debt

You’re not the only millennial with consumer debt. The Angus Reid Institute and The Globe and Mail recently polled Canadians between the ages of 18 and 37, and found that the majority are carrying some level of personal debt.

About 45 per cent reported consumer debt loads of $25,000 or less. Nine per cent of those aged 26 to 37 owe between $50,000 and $100,000 while four per cent owe between $100,000 and $150,000.

If you’re single and want to own property while paying down debt, team up with one or more people in the same situation. It’s getting more common for siblings, friends and even strangers to co-own a residence.

Aside from the general perks of home ownership, co-owning offers a number of benefits, including:

  • Having additional income(s) to make it easier to get a mortgage
  • Living in a larger home than you could afford by yourself
  • Being able to share chores and upkeep
  • Having companionship


There is a level of risk involved so you’ll want to make sure your co-owner(s) is on the same page. Consider what could go wrong and determine how you’ll deal with it ahead of time, and put that in writing.

Talk about creative solutions! Learn how these six people manage co-owning a home.

Freedom to move without your debt load holding you back

There are big cities and small towns across Canada where housing prices are more affordable. Relocating could mean more affordable housing choices, or even the opportunity to buy a larger house for less. And with less of your income going towards housing, you may have more money to pay down consumer debt.

Is telecommuting an option? Telecommuting has benefits for businesses, but it also saves employees money by cutting out daily commuting expenses like gas and meals. It also provides the freedom to live in a less expensive place.

Moving can be a good idea even if you have to change jobs. The lower cost of living and housing can translate into a higher quality of life.  You’ll also have a better chance of being able to pay down your debt faster so you can start focusing on saving for your goals.

Make it a money maker and reduce your debt

Have you considered an income property? Buying a home and renting out space can help you cover the mortgage payment or monthly housing expenses.

When applying for mortgage insurance, the CMHC considers 100 per cent of rental income as income. Mortgage companies also take rental income into consideration.

Options include buying a duplex or a triplex, or renting out a suite in your basement. Make sure that secondary suites are allowed in the area before you buy and that rental space is up to code before finding a tenant.

That extra income could also help you pad your rainy day fund or pay down your consumer debt.

Reduce the size of your home, and your debt

Small homes are more affordable because you’ll pay less in utilities. They’re also easier to maintain — and you won’t be tempted to spend money on stuff you don’t have space for. A smaller monthly payment also means more money for savings and debt repayment so you can be debt free in the future.

Read about one millennial couple’s decision to purchase a small home.

If you want to be a homeowner while still paying down your consumer debt, you don’t have to go the traditional route. Research your options and practice good money management, to avoid being house poor and reach your debt free goals.

How are you juggling the desire for home ownership with the need to pay off your consumer debt? Tell us your story on Twitter. #LeaveDebtBehind #FirstTimeBuyer #Debt

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