Marriage and Mortgage

After several years of dating, I finally proposed. And she said yes! We both have big families, so the wedding was, well, big. Thankfully, our parents covered a good part of the cost, so wedding expenses are not a big part of this debt story.

Our guests were very generous with their monetary gifts, which totalled over $30,000. Jackpot!

Well, except that by that point, our debt had piled up to... wait for it... $30,000.

Oh, happy day! Paying off each credit card and the line of credit felt fantastic. You would think that this would have caused some sort of epiphany, where we would no longer spend more than we made, to take full advantage of this free pass. After all, how many people have the chance to completely wipe out their debt in one night?

Well, that's not exactly what happened. Instead, we went house hunting! After a few exciting weeks of looking at houses, we settled on a nice three-bedroom bungalow just outside of downtown. We put in an offer of $300,000, and it was accepted. In order to avoid a high-ratio mortgage, we decided to put 25% down.

Quick, time to come up with $75,000!

I cashed out my retirement savings under a plan that allows you to do this tax-free for first-time home buyers, which left us about $30,000 short. Good thing that line of credit is paid off, I thought to myself, and promptly withdrew the rest of the down payment from it.

And just like that, we went from being $30,000 in consumer debt, to being completely out of debt, to being back in $30,000 of consumer debt, plus a $225,000 mortgage. And of course, we had depleted all of our retirement savings as well.

What fuelled these decisions? Two things: emotion and lack of financial awareness. The whirlwind of getting married followed by talk of buying a house stirs up a great deal of emotion, which generates seemingly unstoppable momentum. The thought of not buying a house right away, and instead saving up for it down the road, didn't even cross our minds. And our lack of financial awareness, in terms of the impact of taking on this type of debt, meant no red flags were raised.

All of that said, we were tremendously happy to move into the house a few months later, and other than the debt (which rarely crossed our minds anyways), that house was a positive experience from start to finish. A classic case of ignorance being bliss.

Because of that bliss, we also continued to make many more purchases, take vacations, and just generally throw the plastic around without a care. Within a couple years, we had repeated our previous accomplishment, accumulating a new $30,000 of credit card debt. Seeing the credit cards near their limits, I took out a secured line of credit against the house (also known as a second mortgage), and transferred all the card balances to it.

Yes, that's right--we now had two lines of credit, with a total of $60,000 of debt on them, plus about $200,000 remaining on our mortgage.

What continues to amaze me now is how little that situation concerned me at the time. Somehow, I felt that as long as I could keep making the minimum payments, and had enough credit available for day-to-day expenses, all was well. I can't explain it in any other way other than complete and total ignorance about the potential risks of this type of situation.

We weren't done yet. In the next, and final instalment of the background story of how we got here, we hit and exceed the half-million-dollar mark. Stay tuned.