Do you need a Personalized Paydown Plan for your holiday bills?

Most Canadians suffer with their highest personal debt load in January, when the “holiday hit” arrives and your credit card statements let you know just how much the festive season cost you. It’s especially hard if you already had outstanding debt before the holidays. That’s why now is the perfect time to talk about your Personalized Paydown Plan.

If you have at least 20% equity in your home, I can show you how to use it to roll your high-interest debt into a new mortgage for overall savings. Here’s an example—in this case, mortgage, car loan, and credit cards total $355,000. We roll that debt into a new $358,000 mortgage, including a fee to break the existing mortgage, and take a look at the result:

Current mortgage 2.79%, 5-yr term, 25-yr amortization; new mortgage 4.89%, 5-yr term, 30-yr amortization; car loan 7%, 5-yr amortization; credit card payment based on 2% of balance. For illustration purposes only. OAC. Subject to change.

That’s a savings of $596 each month. Now let's decide how you can use that $596. If you use your prepayment privileges and apply it to your mortgage, you could reduce your amortization from 30 years to 18 years. Or, invest it in an RRSP, RESP, or TFSA to reap tax benefits and grow your wealth.

You could also consider putting a portion into a dedicated “December fund” so the next holiday season doesn’t bring financial stress. Instead, you can enjoy guilt-free giving, knowing the bills are covered.

While refinancing is not an option for everyone and every situation, I have access to other financing options that can help. If you think you could benefit from this kind of financial restructuring, get in touch and we can review your situation carefully to determine the best path for you.

Two Tax-time Advantages for First-time Buyers

The 90-day boost – If you’re buying your first home now and your closing date is at least 90 days away, let’s talk. The Federal Home Buyers’ Program (HBP) and a tax refund can boost the funds you have available for your purchase. First, make as big an RRSP contribution as you can – up to your contribution limit or $60,000 per person. You can even use your downpayment savings for this. Big RRSP contribution means a great 2024 refund. Then, after 90 days, you can go back into your RRSP and redeem your contribution under the HBP program. So you’ve got your original downpayment funds back PLUS a nice tax refund. You’ll need to pay the withdrawn funds back on a repayment plan, but this strategy can make a substantial difference in the affordability of home ownership!

$1,500 for first-time buyers – Don’t leave money on the table if you bought your first home last year! You may be able to take advantage of the Home Buyers Tax Credit (HBTC) when you file your tax return. The $10,000 non-refundable HBTC provides up to $1,500 in federal tax relief. You qualify if neither you nor your spouse (or common-law partner) have owned and lived in another home for the past five years. For more information, visit the Government of Canada website.