Are You House Poor?

Being house poor is no joke. It means you can’t afford the home you’re living in and therefore are probably relying too heavily on credit to stay afloat which means you’re racking up even more debt that you can’t afford to pay back. See what we mean, being house poor is not good. But there is a light at the end of the tunnel; you have full control of your finances which means you can change your house poor status.

We want you to own a great home but we don’t want you to borrow more than you can handle. So let’s take a look at what being house poor means and what you can do to prevent or fix it.

 How to Tell if You’re House Poor?

As we discussed above being house poor basically means that you can’t afford the home you’re living in. This means something different for everyone, but if any or all of the following situations describes what you’re currently dealing with then it may be time to re-evaluate your current living circumstances.

• Do you carry large balances on several credit cards?
• Are you relying heavily on those credit cards to pay for necessities like groceries?
• Have you given up family vacations or other travel opportunities because you need to make a mortgage payment?
• Do you have to scrimp and save for months leading up to paying your property and school tax?
• Are you spending more than 30-35% of your income on housing costs?
• Are you constantly worried about the cost of the home you’re living in?

Again, everyone’s financial circumstances are different so it’s important that you evaluate yours based solely on what you are currently dealing with and what you want for your future.

 What to do if You’re House Poor?

      If you find you are already in this situation, the key is to get back into financial balance. Each case is different, so do your homework and consider these actions:

Sell your house and buy (or rent) something smaller.  Sounds drastic, but it frees up assets and is particularly relevant if you are close to retirement.

Refinance your current mortgage (when mortgage rates are down).  Talk to a loan expert to see if this option would be beneficial to you.  

Look into a reverse mortgage (if you’re 62 or older).  This lets you access your equity but there are up-front costs and you’ll want to remain in your house for the rest of your life.  Talk to a financial planner to fully understand this option.

Common Causes of Becoming House Poor

Choosing to purchase a house that is simply too expensive is definitely the most common reason why you might become house poor, but there are of course countless other reasons as well. Let’s take a look at a few of the other reasons and how they can be solved or avoided.

Letting your lender decide how much house your can afford

This goes hand in hand with purchasing a house that’s too expensive but it’s still an important point to make. When you apply for a mortgage you get approved for a certain amount of money but there is no rule that says you need to purchase a house that uses up your entire mortgage. If you have a steady job with a high income or are a two income family then chances are you’ll be approved for a large mortgage. Just because the bank will give you the money doesn’t mean you need to spend it.

Decide on a budget you can comfortably afford then look for a house that fits that budget. Purchasing a $500,000 house simply because your lending will give you $500,000 is not a good idea.

Job loss or reduction in income

No one wants to think about losing their job but it happens. So when you decide to purchase a house you need to take into consideration whether or not you’ll be able to afford to live in it if you lose your job.

Unfortunately, we can’t predict the future but we can be prepared for it. Making sure you have enough savings to live off of for at least a few months will help you to continue to make your mortgage payments while you look for a new job.

No emergency fund or savings

Living in a house is expensive no matter how you look at it. Aside from your mortgage payments, there are countless other expenses that you might not have taken into consideration. Having an emergency fund will help you deal with any unexpected expenses.

Too much consumer debt

If you already have a significant amount of consumer debt before you take on a mortgage you could be looking at a seriously unstable financial future. Unfortunately, it is very likely that you’ll become house poor if all of your available income in going toward debt repayment.

To fix this issue you’ll need to consider paying off your debts before you purchase a house. While this may not fit into your plans for the future, purchasing a house when the rest of your finances are in order is without a doubt the best option.

How to Avoid Becoming House Poor?

The logical answer to this question is obviously to only purchase a house you can afford. But we understand that’s easier said than done and that often you may not even know how much house you can afford. Here are a few of the most important steps you can take to avoid becoming house poor:

• The Government of Canada suggests that you spend no more than 30% of your income on housing costs. The first thing you should do is figure out what 30% of your income actually is. (P.s. 30% is a good place to start but aiming lower is even better)
• Next, you need you figure out what your housing costs will actually be, here’s a hint it’s more than just your mortgage payment. Think property taxes and school taxes, utilities, insurance, snow removal, lawn upkeep, emergencies, repairs and of course your mortgage payments.
• Now you need to figure out how much you can afford to add to your monthly budget. Let’s say you’ve decided you can comfortably afford to allocate $3000 of your monthly budget to your housing costs. This means that all those expensive we listed above need to come to $3000 or less every month. Don’t even look at houses that are out of your price range.
• You’ll also need to save up for those onetime expenses associated with moving into a house. This would be a down payment, closing costs, moving costs and potentially any repairs that need to be made before you move in.
• It would also be advantageous for you to consider all those other costs that might not fall into the housing category. Car payments or public transportation costs, gas, car insurance, groceries, health care, cell phone bill, etc.
• Finally, try living with your new budget before you purchase a house. This will not only allow you to get used to living with a potentially more strict budget but will give you time to make adjustments if you need to.

The most important thing to remember is that everyone’s budgets, incomes, and debt loads are different. And while the government suggests that you can spend 30% of your income on housing and still be in good financial standing, not everyone should take this advice. Owning a house is expensive and if you want to stay afloat you need to tailor your budget and savings to your unique situation.

If you have any questions, give me a call 306-441-6420 Susan Kramm

Adapted from https://loanscanada.ca/debt/are-you-house-poor/

Landscape Maintenance Checklist

Here are some seasonal suggestions for general maintenance of your yard.

In the spring:

-  Remove leaves, sticks, and debris that collected throughout winter.

-  Prepare garden beds for the season.

-  Do a maintenance check on drainage systems and outdoor lighting.

In the summer:

-  Raise mower height to at least three inches.

-  Mulch flower beds as soil dries out.

-  Apply fertilizer to lawn mid-summer, if necessary.

In the fall:

-  Mulch around perennials and plants that need extra insulation.

-  Winterize sprinkler system by draining and turn off watering timer.

-  Clean up all leaf and plant debris from yard and garden.

In the winter:

-  Cut grass until temperature drops below 50 degrees F.

-  Use winter snow fences or burlap to protect plants from wind and salt.

-  Lubricate hand gardening tools to prevent rust.

But don’t stop there.  If you are looking to sell your home, you may want to enhance the exterior of your home before putting it on the market.  Currently in North Battleford, supply still outweighs demand when it comes to home sales. While the focus is often on what can be improved on the interior of the house, many sellers neglect the outside of the property. Most buyers form an opinion whether they like a house or not before they step foot in the front door. The work you do to the kitchen or the fixtures in the bathroom may be great, but by that time it may be too late. If you want to maximize your properties’ value, you need to focus on improving the curb appeal.

First impressions make a difference when it comes to selling your home. Improving the exterior of a property​ may not be as exciting as trying to figure out what to do with the kitchen, but in many ways it is more important. At first glance, you want your property to have a wow factor. At a minimum, it shouldn’t turn off a large majority of buyers. Your curb appeal should start with the condition of the grass, landscaping and any trees or bushes near the front of the property. If you have old, dying shrubs near the front entrance, they threaten to set a negative tone for the rest of the property. Plants on the front stairs, flowers in the garden, fresh mulch and updated shrubs are all easy fixes that have a big return. If your grass is old and there are dirt patches, you can either lay down some sod or start the seeding process months before your house is ready. Little things like cleaning leaves out of the gutters or hosing the driveway may seem insignificant, but if a buyer feels like the house is home before they walk in you are already ahead of the game.

In addition to improving the landscape, you should also look at the physical condition of the property. If the roof is old and only has a few years left, you will get a good return on your money by replacing it and trying to sell for a higher amount. Buyers do not want to come out of pocket after they get into a home unless they are getting a great deal. If they know they will need a new roof in a few years, they will most likely submit a low-ball offer.

In addition to the roof, you also have to look at the siding and exterior of the property itself. Siding, new paint, updated trim, new shutters and fresh gutters can all make a huge difference. You can start with a good power washing of the house and see what kind of impact it has before you look to paint or update the siding. Just by changing the color of the shutters and adding a fresh coat of trim around the doors and windows can make it look like a new house. A new matching front door can also have a big impact. The front door is one of the first things that anyone notices when they enter a house. If the door is old and the handle is rusted, the rest of the house will suffer.

Another area that is often overlooked is the driveway. For an area that gets used every day, it would make sense to make the driveway as appealing as possible. If there are cracks, weeds and other noticeable flaws, improving the driveway will dramatically increase curb appeal. Paving over a stone or rock driveway will make the house more livable and may take a buyer off the fence. You never know which feature will attract or turn off a buyer, but many times it has to do with the exterior of the property. Grass and weeds in a driveway is one of the things that is very unappealing and doesn’t take much time or money to fix.

Finally, you should assess which items around the house are in need of updates or need to be removed. You may have bought the house with a pool, but if it is old and in a bad location, it should be taken down. Pools do not offer as much bang for the buck as you might expect, especially because they will only use a pool during the summer months. If there is minimal back yard space, it may make more sense to take the pool down and open up the yard. It is also a good idea to take down any old basketball hoops or other items that are dated and aren’t doing anything to improve the value. If you have a deck or patio, you should throw a fresh coat of paint on the wood to give it a nice, updated feel.

There are many things you can do to improve the curb appeal of your property. Some of these things may be more costly than you imagined, but they can have a huge impact on your sales price. If you are wondering which items should be updated, give me a call, 306-441-6420 and I can drive to your house and tell you the first thing I think of when pulling up. This will give you an honest assessment and a starting point for your work. Spending time and money on the interior is important, but it will all be for naught if the exterior of the house is a mess.

Adapted from article by Paul Esajian 2014