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Gail Vaz-Oxlade, host of the new HGTV show Til Debt Do Us Part: Home Edition, says one of the biggest challenges for home buyers is to go into the process with their eyes wide open. Too often they take on a mortgage that is too big and then can’t afford to maintain their homes, or they don’t make the lifestyle changes required to stay out of debt. It’s only when they’re on the verge of losing their homes that they seek help.
On her new show, Ms. Vaz-Oxlade challenges homeowners to trim their spending and debt, with a chance to earn $5,000 if they succeed. She spoke to The Globe and Mail about how home buyers can avoid making the bad choices that lead to the dream-house disasters she sees on her show.
What are the biggest mistakes you see home buyers make?
It’s dumb things, like they know they need to have a home inspection, so they pay for a home inspection and they totally ignore everything in the home inspection report.
Routinely people take on more mortgage than they can actually afford. For some reason, people think that because we live in an expensive housing market, that entitles them to use 60 per cent of their income for housing. Well, then, how are you going to buy food? So that pushes them to use their lines of credit or their credit cards to supplement their cash flow.
People renovate themselves to death. They start their renovations and all of a sudden everything sort of whirls out of control. And they have to have the best of this and the latest of that.
People have no ability to defer their gratification. They decide they want Persian rugs, they have to buy the Persian rugs now, and if that means they have to use credit, they use credit. And that’s the wrong way to do it. The right way to do it is to save the money.
How do people not realize they’re piling up so much debt?
Because they keep all their debt in different pools. So they have the credit-card debt in one pool and they have their department-store-card debt in another pool and they have their line-of-credit debt in another pool. And all these pools of debt, they don’t add them up because if they added them up they would just get sick.
The families on your show are at risk of losing their homes. How prevalent is that in Canada?
I think what you need to look at is the number of high-ratio mortgages that are out there and the number of mortgages that are also amortized longer than 30 years, because I think those are the people who squeezed themselves into properties. I say to people all the time, if you can’t save up 20 per cent to put down on a house, you’re doing something wrong, because you’re not really prepared for home ownership yet.
A lot of people think home ownership is always the right choice.
Everybody has sold them the idea that a home is a good investment. But when you look at all the people who are doing equity takeouts [when someone withdraws from the home equity to finance other activities], clearly they’re not treating their home as an investment. They’re treating it as a cash cow to cover their consumer debt.
What are your best tools and tips for homeowners who want to educate themselves and avoid debt?
The first thing you need to do is a spending analysis so you can see where your money’s going.
