Many of us have been busy shopping, baking, visiting with friends and family and now starting to make some New Years Resolutions as well. One might be to start the New Year off with some strong Financial Planning. Perhaps looking for ways to pay off some debts, contribute to your RRSP's or maybe even taking that long wanted vacation or the home renovations that have been sitting on the back burner.
Ø Is your mortgage Tax Deductible?
Ø When should you consolidate your debt?
Ø What are the Benefits to you?
Ø Would you receive a Tax Benefit?
Make 2008 your best year ever!
Tax deduction and home equity loan consolidation
Another possible advantage is that interest you pay on your equity debt consolidation loan may be tax deductible. Normally, if you add your first mortgage to a new debt consolidation loan, and the total does not exceed 100% of the appraised value of your property, the interest you pay will be fully deductible. Your tax consultant can advise you on the matter, and it's always a good idea to check with him or her. A yes to any one of these questions is a red flag. A yes to more than one indicates that you're probably a strong candidate for debt consolidation. Don't let your stress level get any higher.
Ø Have you hit the maximum limits on all your credit cards?
Ø Do you charge more than you can pay off each month?
Ø Are you unable to pay more than the minimum payments?
Ø Do you accept every credit offer you receive?
Ø Are you transferring balances to avoid paying them off?
Ø Are creditors calling you directly to ask about payment?
Ø Are you incurring fees for missed payments?
Ø Are any of your credit accounts in default?
Why should I refinance?
If you bought your home a few years back when annual interest rates were 12 percent, refinancing now can save you a great deal of money over the term of the mortgage. Or you might be able to switch from a 30-year mortgage to a 15-year, so you can pay off your loan in half the time with roughly the same monthly payments.
There are several reasons to refinance your home:
1. Lower the interest rate on your mortgage, reducing your monthly payments, and overall cost;
2. Reduce the term or length of your loan, doing so can save you thousands of dollars in interest;
3. to provide a means of consolidating your debt;
4. Contributing to your RRSP's and take advantage of the tax benefits.
5. To draw on the equity built up in the house to get cash for a major purchase or for children's education;
6. Have an adjustable-rate mortgage (ARM) and want a fixed-rate loan to have the certainty of knowing exactly what the mortgage payment will be for the life of the loan.
It is better to refinance if you can get an interest rate at least two percentage points lower than what you are currently paying. However, every situation is different. Some lenders are offering reduced fees or no points. Asking yourself a few questions may help you determine if you can save money:
1. How much can I lower my current monthly payment?
2. How much will I pay in refinancing costs?
3. How much will I still owe on the house?
4. How much am I currently paying each month?
5. How much did I initially pay for the house?
There are other considerations, too, such as how long you plan to stay in the house. Most sources say that it takes at least three years to realize fully the savings from a lower interest rate, given the costs of the refinancing. Itemize all the expenses of the refinance and estimate your new monthly payments. Answering these questions can help you to decide if you should refinance.
Thank you for reading my blog and if there is anything else I can help you with please don't hesitate to contact me,
A. Mark Argentino
P. Eng. Broker
Specializing in Residential & Investment Real Estate
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