I thought I was financially ready to buy a home — then my income fell, a $18K repair bill arrived and I had no idea where to turn

Then life happened. Her work hours were cut, reducing her income by nearly 20%. And that was when her house experienced some physical trauma — plumbing, electrical and roof damage from a particularly nasty storm. Suddenly, she was staring at a $18,000 repair bill.

Diane’s dream home had become a source of financial dread. And she is far from alone.

A 2025 Ipsos poll shows just over 40% of Canadians say they’re within $200 of being unable to meet their monthly financial obligations. An additional poll by RBC from the same year reports that almost half (48%) of its respondents have no emergency savings at all.

Meanwhile, guidance from major Canadian financial institutions like Scotiabank estimates homeowners should budget 3% to 5% of a home’s value annually for total home ownership costs — including maintenance, repairs, property taxes and insurance. On a $600,000 home, that’s upwards of $30,000 a year, something the listing price doesn’t show.

For Diane, all of that hit at once. Here’s what she, or anyone facing the same crunch, should consider.

Talk to your lender before you panic

It’s easy to freeze up or feel ashamed when your income drops. But with mortgages, letting time pass is the worst thing you can do, as your options will disappear and turn a manageable setback into a long-term credit problem.

Reaching out to your lender early can provide relief. Canada’s major banks — often called the Big Six — all have hardship programs for borrowers facing short-term financial shocks. These can include temporary payment deferrals, interest-only periods or amortization extensions to reduce monthly obligations. During the COVID-19 pandemic, more than 800,000 Canadian homeowners accessed mortgage deferrals through their lenders, so these programs are well-established.

The key is to act before you miss a payment. Once you’re behind, options narrow and penalty fees start compounding. Contacting your lender early isn’t an admission of defeat — it’s financially savvy.

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Create short-term cash flow

Between a shrinking paycheque and mounting repair bills, Diane is in a cash crunch. This is where she — and anyone in a similar position — has to get creative with bringing in money. This may include freelancing side-gigs, selling underused assets or renting out a spare room.

In fact, renting a room or a basement suite can generate significant extra income that helps cover essentials like repairs, utilities and mortgage payments while longer-term solutions emerge. Financial planners call this “bridge income” — a temporary cash flow to stabilize the situation without derailing future goals.

An important note for Canadians: If you rent out a room in your primary residence, you must declare any rental income to the Canada Revenue Agency (CRA). The upside is that landlords can deduct a proportional share of eligible expenses, such as utilities and maintenance, against that income. Keeping clear records from day one makes tax time far less stressful.

None of these choices will feel particularly comfortable at the time. But the alternative, like running out of cash and falling behind on the mortgage, is far worse.

Think carefully before you touch your retirement savings

Diane has a Registered Retirement Savings Plan (RRSP) she promised herself she would never touch, and raiding it during a cash crisis comes with real financial pain.

RRSP withdrawals are considered fully taxable income in the year they’re withdrawn. On top of that, the financial institution is required to withhold tax at source: 10% for amounts up to $5,000; 20% for amounts between $5,001 and $15,000; and 30% for amounts above $15,000. Worse still, the contribution room is lost forever, meaning you can’t put the money back.

In contrast, a Tax-Free Savings Account (TFSA) allows withdrawals without tax consequences, and the contribution room is restored the following calendar year. If Diane had a TFSA, that would be a far less costly emergency option for her to use. Going forward, contributing even small amounts to create more TFSA room is one of the most effective ways to build a financial buffer that doesn’t punish you for using it.

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Is staying in the home realistic?

For someone like Diane, deciding whether to stay in her home is the hardest question she will have to face. After years of saving, selling can feel like giving up. But financial experts caution against the “sunk-cost trap” — holding on to a property simply because of what you’ve already put into it, even when the math no longer works.

When income drops and repairs keep mounting, selling now might be the move that protects her equity and preserves her retirement savings. The longer she waits without a plan, the less financial control she has.

Housing affordability is already a major pressure for Canadian homeowners. RBC Economics’ housing affordability research identifies Canada’s housing market as one where ownership costs consume a historically high share of household income in most major markets. The most recent Housing Market Outlook from the Canadian Mortgage and Housing Corporation (CMHC) reinforces this, citing affordability as the central challenge facing homeowners.