Rising mortgage interest rates hurt everyone. Louise and Julien are no exception and fear not being able to keep the family residence.

The couple acquired their home in the summer of 2021 for $440,000. They were able to put down a good down payment, and their mortgage now stands at $401,000.

Yes, but here it is: like many other people at the time, they opted for the variable rate which was then extremely low.

They were far from suspecting that the situation would change radically the following year.

Exploding expenses

Initially, their monthly payments were $1,650. With the new interest rate applicable to their loan, they now have to pay $2,250. Worse still, their amortization period has increased from 22 to 40 years!

They are extremely discouraged, as they had calculated that they would have finished paying their mortgage by the time Louise retired.

Their budget is already tight.

With two children in high school in sports-studies programs, they must pay an additional tuition of $7,700 annually.

“And with the rising cost of groceries, the budget we have to spend on food has jumped to $1450 per month! “Laments Louise.

In addition, debts related to two credit cards, a personal loan and a line of credit, for a total of $45,800, weigh heavily on the finances of the household which must make monthly minimum payments of $1,240 for repay them.

too much debt

Unable to meet all these expenses given the sharp increase in their monthly mortgage payment, Louise and Julien went to consult insolvency experts.

“We did an inventory of their debts and analyzed their budget. We found that there are few to no places to cut as they don't travel, rarely go to restaurants, and don't have any non-essential possessions like a trailer, ATV, etc. They don't go overboard: all their money is spent on children, sports and the family," says Pierre Fortin, who is a licensed insolvency trustee and president of Jean Fortin.

To keep their house, they have to make mortgage payments of $2,250, and given the weight of their non-mortgage debt, their situation is rapidly deteriorating.

“A debt consolidation is ruled out due to their level of indebtedness which is well over 40%. So we suggested other options to them. After careful consideration, they chose the consumer proposal,” explains trustee Pierre Fortin.

Since the house represented little equity – the difference between net realizable value less fees and the mortgage – the creditors agreed to $24,000 in 60 installments of $400 per month, without interest.

"To determine whether the amount offered in a consumer proposal is reasonable and has a good chance of being accepted by creditors, the trustee considers the net realizable value of the assets, less expenses, and the person's income. “says Pierre Fortin.

From now on, Louise and Julien will be able to sleep soundly, and above all to keep the family home.