While homeownership was once viewed as a path to wealth and financial stability, some homeowners are feeling trapped by homes they can no longer afford.<\/p>\n
Take Mendy, for example. This 35-year-old from Canada has a total of $1.8 million in debt, which includes his family home and a triplex he was renting out in Montreal. Now, with a second child on the way, Mendy\u2019s feeling downright anxious about his financial situation.<\/p>\n
When Mendy called into The Ramsey Show<\/a> for advice, host Dave Ramsey was rather blunt, telling Mendy that he and his wife need to make some serious changes before it all burns to the ground.<\/p>\n As Mendy explained on the show, he owes $590,000 on the family home, which is worth $750,000. He also owes $680,000 on the triplex, worth about $850,000, which he\u2019s listed for sale (so far, there haven\u2019t been any takers).<\/p>\n On top of that, he owes roughly $70,000 on each of his two electric vehicles, along with $35,000 in student loan and credit card debt, and another $350,000 in personal debt (mainly to his cousin, who lent him money for a down payment and for renovations to both properties). Mendy\u2019s total household income is around $120,000 per year before taxes.<\/p>\n \u201cI had my \u2018a-ha’ moment when I saw $22,000 going out in one month after doing a budget and I don\u2019t know what exactly to do,\u201d Mendy shared with Ramsey and his co-host, Rachel Cruze. \u201cI cut out everything from potato chips to haircuts, literally anything I could to curb the debt.\u201d<\/p>\n Taking on more work isn\u2019t exactly an option, either. As he explained on the show, Mendy is bipolar and his doctor has told him he needs to maintain a healthy work\/life balance. And making matters worse, his wife is about to go on maternity leave.<\/p>\n \u201cThe answer to getting rid of this anxiety is getting rid of all the crap and the debt associated with it,\u201d said Ramsey. That starts with getting rid of the EVs and replacing them with cheap cars, \u201clike, $5,000 cars,\u201d said Ramsey.<\/p>\n While Mendy has given up on being a landlord and is trying to sell the triplex, \u201cthat thing\u2019s got to be priced in such a way that your real estate agent can sell it and get it gone,\u201d said Ramsey. If Mendy can make a profit of $200K to $250K on the triplex, he could then use that to pay off a chunk of his $350K personal debt.<\/p>\n Story Continues <\/p>\n Ramsey also says getting Mendy\u2019s wife on board will require a serious conversation.<\/p>\n \u201cThe house is on fire, darling,\u201d said Ramsey, assuming the role of Mendy in this conversation with Mendy\u2019s wife. \u201cYou get to decide with me if we\u2019re going to let the house burn down or are we going to do something to put it out?\u201d<\/p>\n Read more: Americans are \u2018revenge saving\u2019 to survive \u2014 but millions only get a measly 1% on their savings. Here\u2019s how to quickly earn 280% more on your cash<\/a><\/p>\n For decades, owning a home has been considered the ultimate financial security blanket, offering a path to future wealth. But these days, for many middle-class families, homeownership can mask financial instability rather than solve it.<\/p>\n As a result, many Americans currently find themselves in a \u201chomeownership trap,\u201d where the financial burden of owning a home eclipses other financial goals and erodes their quality of life.<\/p>\n \u201cThis year, the U.S. housing market is shrouded in uncertainty, with little indication that record-high levels of unaffordability will ease anytime soon,\u201d states the Harvard Joint Center for Housing Studies in a report called The State of the Nation\u2019s Housing 2025<\/a>.<\/p>\n Property taxes increased by an average of 12% between 2021 and 2023, according to the report, while home insurance premiums increased 57% from 2019 to 2024.<\/p>\n In some states \u2014 like California, Florida and Louisiana \u2014 the \u201cscale and frequency of climate disasters has prompted private insurers not only to raise premiums, but in some cases to reduce coverage or pull out of markets entirely.\u201d<\/p>\n As a result, an increasing number of homeowners are cost burdened<\/a>, meaning they spend more than 30% of their household income on housing and utilities.<\/p>\n \u201cAs of 2023, nearly a quarter (24 percent) of all homeowners are cost burdened,\u201d according to The State of the Nation\u2019s Housing 2025<\/a> report. That 24% translates to 20.3 million households throughout the U.S. It\u2019s also a \u201creversal of a nearly 10-year trend of consistent declines in homeowner cost burdens between 2010 and 2019.\u201d<\/p>\n If you\u2019re planning to buy a house, you\u2019ll want to make sure you\u2019re budgeting for everything \u2014 not just the purchase price. Consider property taxes, insurance, utilities, repairs and ongoing maintenance. If you have a variable-rate mortgage, you\u2019ll also need to have room in your budget for payments with higher interest rates.<\/p>\n Once you tally up these costs, if the total is well above 30% of your household income, you may want to consider other options \u2014 such as buying a smaller, less expensive home or even co-buying with friends or family.<\/p>\n You\u2019ll also want to shop around for the best mortgage rate you can find, since the current rate averages around 6.72%<\/a> for a 30-year mortgage. To negotiate a better rate with lenders, it helps to have a strong credit score and low debt-to-income ratio.<\/p>\n If you can afford a 20% down payment, then you can avoid paying for private mortgage insurance<\/a> (PMI) each month on a conventional loan.<\/p>\n \u201cBorrowers making a low down payment might want to consider other types of loans, such as an FHA loan<\/a>,\u201d according to the Consumer Financial Protection Bureau. \u201cOther types of loans may be more or less expensive than a conventional loan with PMI, depending on your credit score, your down payment amount, the lender, and general market conditions.\u201d<\/p>\n If you\u2019re already living in a money pit, you could try to renegotiate your mortgage to lower your monthly payments. For example, you could consider a loan modification<\/a> (changing the terms of your mortgage) or refinancing (replacing your existing mortgage with one that has better terms).<\/p>\n For those living in a home they can no longer afford, like Mendy, the solution could require a more radical change \u2014 like finding a roommate, downsizing to a smaller home or moving to a less expensive neighborhood. And, like Ramsey said, \u201cquit buying crap you can\u2019t afford.\u201d<\/p>\n