{"id":24106,"date":"2026-04-09T15:00:20","date_gmt":"2026-04-09T15:00:20","guid":{"rendered":"https:\/\/thefundspros.com\/?p=24106"},"modified":"2026-04-09T15:00:20","modified_gmt":"2026-04-09T15:00:20","slug":"how-to-decide-if-downsizing-your-home-when-youre-in-debt-is-worth-it","status":"publish","type":"post","link":"https:\/\/thefundspros.com\/?p=24106","title":{"rendered":"How to Decide If Downsizing Your Home When You\u2019re in Debt Is Worth It"},"content":{"rendered":"
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By Julie Jaggernath<\/em><\/p>\n

If you\u2019re thinking about downsizing, crunch your numbers carefully because it might cost you more than it saves in the long run. Since the pandemic, the ability to defer mortgage payments has become a more seamless process. But given the persistent high cost of living, you might be thinking about taking it one step further \u2013 cutting ties with a big mortgage for one that\u2019s more affordable. There are a few ways to do this, like moving to a less expensive city or cashing out savings to pay off a mortgage, but the option many people turn to first is downsizing their home.<\/p>\n

Here are some things to consider as you decide if downsizing is a way to pull yourself out of debt, or if you\u2019re better off looking at other options first.<\/p>\n

Low Interest Rates Made Debt Seem Normal<\/h2>\n

If you\u2019re wondering how Canadians got to the point we\u2019re at, one explanation often tops the list. The low interest rates that we experienced in the 20 years prior to the pandemic made many people think that debt is normal. A lot of households relied on credit to pay for everything from groceries to vacations. Credit cards, vehicle and personal loans, mortgages, and lines of credit were all used, often without a second thought. However, if we view being in debt as normal, we risk falling into the trap of debt stress that\u2019s hard to escape from.<\/p>\n

What we spend our money on shifted during the pandemic, but credit use returned to pre-pandemic levels. This made economists predict that after the health crisis, we would have an economic crisis, which would almost surely be followed by an insolvency crisis as people grapple with how to regain control of their finances. Interest rates were expected to remain low as Canadians and the economy fought to regain financial stability; however, soaring inflation was unanticipated and the Bank of Canada was forced to raise interest rates.<\/p>\n

Historically speaking, interest rates are still on the lower side which could make this an ideal time to pay off debt before interest rates do rise to more normal levels. Given ongoing geopolitical uncertainty, to balance your budget, you might however, face some difficult decisions along the way. Rather than tackle your situation alone, we have highly trained budgeting experts who are happy to share their best tips and guidance. If you would like their help, reach out to us sooner than later and one of our credit counsellors would be happy to help you get back on track.<\/p>\n

The Most Effective Ways to Pay Off Debt<\/p>\n<\/p>\n

Avoid Spending Too Much on Housing-Related Costs<\/h2>\n

When we put too much of our income into a specific type of expense, we can end up with a budget that\u2019s too tight for our lifestyle. Spending too much on housing-related costs traps many people into a cycle of relying on credit to make ends meet.<\/p>\n

When we spend too much on housing costs it makes us \u201chouse poor.\u201d This means that our mortgage or rent and other bills tied to home ownership \u2014 like utilities and property taxes \u2014 leaves us without enough money for the rest of our monthly costs. If we reach for our credit cards to cover the shortfall, our debt will only grow. But whether we should or shouldn\u2019t downsize to free up cash and get out of debt isn\u2019t always a straightforward answer.<\/p>\n

How to Avoid Foreclosure<\/p>\n

What Does It Cost to Downsize?<\/h2>\n

Moving, whether you\u2019re downsizing or not, isn\u2019t cheap. You need to sell your current house, find a new one, pack, unpack, and make yourself comfortable in your digs. You might plan to take your furniture and even some appliances with you but discover that that they don\u2019t fit, so you need to buy new ones. Moving comes with as many expenses as it does work, making it a better long-term strategy than short-term fix.<\/p>\n

Taxes and Fees<\/h4>\n

When you\u2019re buying, you\u2019re on the hook for what can feel like an endless amount of expenses. It\u2019s good to budget about 5% of your purchase price, in addition to your down payment, for all of these costs. They can come to thousands of dollars, depending on which province you\u2019re in.<\/p>\n

Just to get the deal done, these expenses include:<\/p>\n