House rich

Louise Edgerton, her spouse, John Camus, and their daughter 10-year-old daughter Fianna, seem like the perfect family that has it all as they prepare home-made brownies in their personally designed dream home with a glistening white kitchen. However, Louise says that there is a big financial setback that could change their entire lives; leaving her unable to see the light at the end of the financial tunnel. Unknown to the people around them, the Edgerton family is considered to be house poor, or as Louise puts it, house rich and cash poor.  ”It’s as if we are living a life in a house of cards, at any moment they could come crashing down around us,” she says.

During the construction of their dream home, the Edgerton family was faced with some unexpected financial situations that took a toll on the way they live now. Mr. Edgerton lost his job just after signing on to build their home; then shortly after hit with a $27,000 bill from their contractor for extra costs. Leaving them to use money from their credit cards and line of credit to cover it all. After the home was finished, they have continuously lived a frugal life cutting down on the extras in life and stopping their payments to their retirement fund and their daughters RESP. Although they made smart decisions regarding their credit cards using a calculator by to manage their debt on low interest credit cards, often dipping into credit cards for monthly expenses was not a great way to live.

The Edgerton family live in the prestigious Lachute, Que., area; which is approximately an hour from Montreal. They are away from the typical hot zones for housing such as Toronto and Vancouver. In order to build their home outside of these hot zones, with the designs that they desired, they ended up with a $413,000 mortgage. According to the Edgerton family they spend nearly 43 percent of their combined income just to coverage their mortgage payments and other housing expenses that come with being a homeowner. One they have finished paying their monthly bills and purchasing groceries, they live a “hand to mouth” lifestyle because there isn’t any income left to spend on anything else.

As Mrs. Edgerton stated, one financial setback could cause potential ruin for this family that is just barely making it as it is. If unplanned financial situations occur such as a loss of income, a rise in interest rates, or an unavoidable major expense, it could result in the loss of their home. Mrs. Edgerton comments that “It is worrisome to know that so many people, including ourselves, have come to living on the edge without even realizing that things could drastically change if our financial live go in the wrong direction.”

Unfortunately, with house prices continuously on the rise in several regions and the tempting low interest rates provided with many mortgages, there are many other families living the same lifestyle as the Edgertons. Having an over priced mortgage, car payments, raising a family, purchasing necessities, in combination with other housing expenses it can be almost impossible to avoid living a life on the edge.

In fact, the debt-to-income ratio during the fourth quarter was at its highest; having $1.63 in debt for Canadians for every $1.00 in disposable income. However, unlike the Edgertons, many people do not discuss their struggles to live day by day. Having so many people living on edge, it could be a disaster if too many people reach their tipping point or if the market begins to decrease and they have to sell. It will cause a bigger reduction in the housing market. However, experts do believe that the housing market should stay stable and that it will begin to slow down with a couple years. 

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