House poor at six thousand dollars a month: the honest arithmetic of keeping a home you cannot afford
I’m paying $6,000 a month and drowning. What are my real options?
The first question is whether the housing payment works after the rest of the budget is examined. If unsecured debt is taking the money the mortgage needs, an insolvency assessment may identify another route. If the housing payment itself cannot be carried, compare a voluntary sale and rent with the cost of holding on before a lender forces the timing.
Who these remedies are for. Everything on this page about a consumer proposal or a bankruptcy applies to a person who is genuinely insolvent under the Bankruptcy and Insolvency Act: someone who cannot pay their debts as they come due, or who owns less than they owe. That is not a formality. It is the first thing I assess, and the law requires me to. If you are not insolvent, these are not your remedies, and arranging your affairs to look insolvent when you are not is the worst thing you can do: the Act lets a trustee reverse payments and transfers made before a filing, the Official Receiver examines a bankrupt under oath about the causes of the bankruptcy and what happened to the property, and a discharge can be opposed on exactly those facts. I am bound by my Code not to assist anyone down that road, and I will not.
I am Paul Franchi, a Licensed Insolvency Trustee in Ontario, and a lawyer by training. This page is for people who are already house poor: paying six, seven, eight thousand dollars a month to keep a home, falling behind on everything else to do it, and telling themselves that at fifty they will never qualify again so they had better hold on.
This decision is personal as well as financial. It may involve how you see yourself and the home you expected to keep. It needs the numbers and room for a difficult household conversation.
The first decision is the payment
If the full budget could carry the mortgage, housing costs and an available proposal payment, a consumer proposal may be one route to assess while you keep paying the mortgage. If the housing payment itself cannot be carried, calculate the cost of selling and renting before a lender forces the decision. The next step is to test your actual numbers and insolvency position with a Licensed Insolvency Trustee. Still not sure where you stand? Send me your question. I read them myself and I answer them personally. If you want to talk through next steps, I can help directly in Ontario, and the other Licensed Insolvency Trustees I work with cover the rest of Canada. Paul Franchi, Licensed Insolvency Trustee.
What being house poor is actually costing you
Put the monthly cash needed to own beside the monthly cash needed to rent, using the same cost categories, and multiply the gap by the period you are considering. The dollar amounts below are hypothetical household inputs, not a local rent quote. The comparison includes utilities and insurance on both sides. The ownership payment includes mortgage principal, which can build equity, so a cash-flow gap is not a measure of lost wealth. Sale costs, property-price changes and payments under any proposal need their own calculation.
| Item | Monthly |
|---|---|
| Mortgage, property tax, insurance, utilities and upkeep on the house | $6,000 |
| Illustrated rental housing budget, including rent, utilities and tenant insurance | $3,200 |
| The gap | $2,800 |
| The gap over a year | $33,600 |
| The gap over three years | $100,800 |
Now the second table, which is the one nobody runs.
| Three years from now | Hold on | Sell, restructure, rent |
|---|---|---|
| Illustrated housing cash paid, before sale costs and debt-plan payments | $216,000 | $115,200 |
| The unsecured debt | depends on the payments made and interest charged | if a proposal is available and accepted, its payment and remaining term depend on the agreed terms |
| Your credit file | depends on actual payment history | a filing affects the file; the credit guide explains reporting without a recovery promise |
| The house | retained if the mortgage and other obligations can be carried | sold; net proceeds depend on the price, costs, mortgages and any proposal terms |
The first table shows the illustrated cash-flow gap. The second identifies decisions and conditions; it does not predict what either household will own or owe in three years. Put the sale costs, mortgage principal repaid and any debt-plan payments beside these cash figures before choosing.
“At fifty I’ll never qualify again.” Is that true?
This page cannot promise when you will qualify for another mortgage. Ask a broker what a lender would require on your actual file, including your income, debts, down payment and payment history.
An insolvency filing affects your credit file. Your credit after a consumer proposal or bankruptcy: R7, R9, and the honest answers explains the reporting questions, and Mortgages and a Consumer Proposal: Renewing, Refinancing, and Buying a Home explains the mortgage questions. Neither this comparison nor the example supplies a date when you will qualify again.
Now look at the file you have today. Put the unsecured balances, interest, minimum payments and any arrears beside the housing payment. Compare the available ways of dealing with them. Holding on while other debt grows adds to the amount the household must eventually repay or address; a hoped-for future mortgage does not settle that calculation.
Making the decision
A home carries more than a payment. Write down what staying and leaving would each mean for the household, then put those concerns beside the numbers. If the conversation is difficult, consider speaking with a qualified counsellor. The aim is to make the financial choices and the household concerns clear enough to discuss together.
Can you keep the house and fix the rest?
Assess whether the full budget would work with an available proposal payment, the mortgage and all other household costs included. If unsecured payments are part of the shortfall, changing them may help; it does not remove the need to pay the mortgage or prove that the remaining budget is affordable.
A consumer proposal deals with unsecured debt, the cards and the lines and the loans, and leaves a mortgage you keep paying alone. Filing does not let your lender treat you as in default: while your proposal runs the lender cannot end, change or call the mortgage because you filed, and the mortgages guide sets out what actually happens at renewal, lender by lender. The proposal offers your creditors what you can actually pay over up to five years. When it is done, the debt is done. The Consumer Proposal Resource Centre explains the whole of it, and the Consumer Proposal Calculator will show you what a proposal on your unsecured total would cost each month.
Start with a complete budget for each available route. Include the actual proposal payment, if that route is available, rather than treating the card payments as money that simply disappears. If the mortgage and the other costs still cannot be carried, compare a sale and a plan for any remaining debt.
Six levels of leverage: which one is you?
How much a proposal costs you, and which kind of proposal you can use, is decided by three things: how much equity sits in the home you live in; whether a second property’s mortgage pushes your total over the consumer proposal’s ceiling; and, the clincher, whether one lender holds a mortgage over both properties at once. Find your rung. The price and the door follow from it. A consumer proposal and a bankruptcy are not options that everyone has. They are for a person who is insolvent under the Act: someone who owes at least $1,000 and who either cannot pay their debts as they come due, has stopped paying them, or owns less than they owe. The first thing a Licensed Insolvency Trustee does, before anything else, is assess whether that is your position. If it is not, these are not your options, and I will tell you so.
Two facts first, so the ladder makes sense. Your creditors measure a proposal against what a bankruptcy would have returned them, and in a bankruptcy the equity in your home is realisable once it is over Ontario’s small exemption threshold, all of it and not just the excess; so equity in the home you live in raises what a proposal has to offer. And a consumer proposal is available only where your debts, leaving out debts secured by the home you live in, are within a set limit; the mortgage on any other property counts in full, so a second property’s mortgage can push you over the line on its own. Over the line, the route is a Division 1 proposal, the same idea with different mechanics and different votes.
| Rung | Who you are | The door, if you qualify | What it costs, and why |
|---|---|---|---|
| 1. Fully levered, no equity, heavy debt | One home, mortgaged to the hilt, no equity to speak of, and a lot of unsecured debt on top | Consumer proposal | The absence of realizable home equity affects the comparison. A bankruptcy would return your creditors almost nothing from the house, so the proposal is measured against almost nothing; the payment is set by your income, not your equity. You keep the house so long as you keep paying the mortgage. |
| 2. Equity in the home, debt under the ceiling | One home with real equity, and unsecured debt within the consumer proposal limit | Consumer proposal | You keep the house, and the equity makes the proposal cost more, because the offer has to reflect what a bankruptcy could have taken. Asset-rich and cash-poor households sit here, and this is where the payment surprises people. |
| 3. A second property with a small mortgage | The home, plus a rental or a cottage with a modest mortgage; the total, excluding debts secured by the principal residence, still under the limit | Consumer proposal | The second property’s mortgage counts toward the ceiling but does not breach it. The property is kept if it carries itself, or surrendered to its lender if it does not, with any shortfall going into the proposal as unsecured debt. |
| 4. A second property with a large mortgage | The home, plus a second property whose mortgage alone carries the total over the limit | Division 1 proposal | Same idea, different door. The creditors vote by a different rule and the mechanics differ, but the household keeps the home it lives in on the same terms. |
| 5. The second property is underwater | The home, plus a second property worth less than its mortgages, that costs money to hold and cannot be sold without a shortfall | Assess the applicable proposal route and the arithmetic of waiting first | The shortfall on the second property is a real number, it becomes unsecured debt once the property is gone, and the proposal deals with it. But the first decision is not which proposal; it is whether to keep paying to hold an asset that is going backwards, and that decision has a monthly price you can calculate. |
| 6. One lender holds both properties | Any of the above, plus a second mortgage from a private lender registered against both the home and the second property at once: one loan, two titles | Division 1 proposal, designed around that lender | This lender holds the cards. Because his mortgage sits on both titles he can refuse to release either property unless he is paid in full, unless the mortgage itself says otherwise; so he can hold up the sale of either one, and if the proceeds of one sale cannot pay him out, the default rate and the fees do the rest while you wait. A consumer proposal cannot make him accept less or release his security. A Division 1 proposal stays him from enforcing and can be put to secured creditors as a class, binding the class if it votes for it. How the classes are drawn matters, but the Act sets the test, and a lender who thinks he has been boxed in can ask the court to redraw them. |
Use the ladder as a checklist. The proposal route depends on your insolvency position, the debt that counts toward the consumer proposal ceiling, your assets and the security held by each lender. Put current valuations and payout statements beside the actual balances. The statutory ceiling and the Ontario exemption are on the linked pages; the six rows are a way to organize the questions, not additional thresholds or a decision about your eligibility.
Where you sit on this ladder decides which of this series’ pages is yours. Rungs 1 and 2 are this page and the selling decision on Selling your house when you have too much debt: before, during, or after a proposal. Rungs 3 to 6 are the underwater page, The condo that no longer pays for itself: underwater, bleeding cash, and the four ways out, and rung 6 is also the private-lender section of this site’s guide to what actually happens in a power of sale in Ontario. The renewal that started it all is on My mortgage renewal was denied, or I can’t afford the new payment: what happens next.
How the payment is built, rung by rung, is on How a consumer proposal payment is calculated, and Division 1 Proposals in Plain Terms explains the other door. The Consumer Proposal Calculator puts your own numbers on your own rung. The consequences page prints the current Ontario exemption figure. None of this is a reason not to file. It is the reason to know your rung before you decide.
If the payment itself is the problem: sell, and then what?
Sell on your own timetable, before a lender is involved, with the trustee in the room from the start, and then deal with the rest of the debt from a position of having cash rather than a house.
The sequence and the mistakes, and they are real mistakes with real consequences, are on Selling your house when you have too much debt: before, during, or after a proposal, and this page does not repeat them. Two things belong here. First, if the sale will not clear the mortgages, the shortfall is unsecured debt of the kind a proposal deals with, and the underwater page of this series has the arithmetic. Second, renting for the years it takes to finish a proposal is not a defeat. It is the second column of the table above, and the full calculation tells you what that option would cost.
The money from family, and the marriage
Money borrowed from family and a decision shared with a spouse need their own conversations. Put both beside the financial plan.
The family loan. If a parent or a sibling has been lending you money to keep the house, they are a creditor, and a filing treats them as one. Their loan does not get paid back first because they are family; paying them ahead of the others in the twelve months before a filing can be reversed, with no intent to prove, and the money comes back into the estate. And a family lender does not get a vote in favour of your proposal; the law lets them vote against it, never for it. The honest conversation is the one you have before you file, in which you tell them what their loan is and what it will become. It can be a difficult conversation; have it before making another repayment promise. What you owe them is the truth and a plan, not a promise you cannot keep.
The marriage. If the home is shared, the decision needs a shared conversation. One person may want to stay while the other wants to sell. Put the monthly payment, the debt and the alternatives on the table together. If you cannot talk it through alone, seek help with the conversation before committing to a financial plan.
What I would tell my own family
If someone I loved were paying $6,000 a month to keep a house and going under to do it, here is what I would say. The house is not you. The payment is a number. Find out whether you can carry it with all the other household costs and any available proposal payment included. If that budget works, assess the route that lets you keep paying the mortgage. If it does not, compare a voluntary sale, the cost of renting and a plan for any remaining debt before a lender forces the timing.
And say it to the family who lent you the money, and to the person you share the bed with, before you say it to me.
Common questions
Should I sell my house to pay off debt? Only after you have run both tables above. If the mortgage fits once the unsecured debt is dealt with, a proposal may be one route to assess while you keep paying the mortgage. If the payment itself is the problem, compare a voluntary sale with the cost and risks of holding on. The full decision page is Selling your house when you have too much debt: before, during, or after a proposal.
What does house poor mean? Spending so much of your income on the home that the rest of your life runs on credit. The page you are reading is for the person for whom that is already true.
Can I keep my house in a consumer proposal? Yes, so long as you keep paying the mortgage. The depth, including renewal during the proposal, is on Mortgages and a Consumer Proposal: Renewing, Refinancing, and Buying a Home.
How long after a proposal can I buy a house? There is no date this page can promise for your household. What lenders actually look at, and which lenders to approach first, is on the mortgages page.
The analysis behind this page
The rules on what a proposal reaches, on keeping the home, on how equity sets the payment and on what is commonly reported to the credit bureaus are set out on the Consumer Proposal Resource Centre, Mortgages and a Consumer Proposal: Renewing, Refinancing, and Buying a Home, How a consumer proposal payment is calculated, and Your credit after a consumer proposal or bankruptcy: R7, R9, and the honest answers. The tables are arithmetic on stated assumptions. This page is general information about Ontario law and not advice about your situation.
Can’t find your answer here?
This site is built to answer these questions properly, and most of the time it will. If yours is not here, send it to me. I read them myself, and I answer them personally.
If what you want is to understand your next steps, I can help you with that directly in Ontario. The first thing I will do is assess whether you are insolvent under the Act; if you are not, I will say so. The other Licensed Insolvency Trustees I work with can assist across the rest of Canada.
