November 28, 2007, 8:00 am

Restructuring My Debts Through My Property

by: The Financial Blogger Category: Pay off your Debts, Project $1500

Email This Post

Print This Post

Post a Comment

For those who are following my Financial Ramblings, you are well aware that I was in the process of paying off my debts and restructuring my whole financial situation through a bigger HELOC. I have already written about this strategy in the past but since I can apply it to my own situation, I thought I would explain what I did and why I did it. As I previously mentioned in the past, I think I made a deal with this property.

I will start my explanation with some facts for today and I will post the strategy and the result in the following days. I was a bit reluctant to post about my assets and net worth but I thought it could help many people to get started. In fact, I really started to build my net worth about a year ago (when I sold my first house). Having two kids obviously make things more complicated. Nonetheless, I think I have a pretty good plan for the years ahead. So here my situation before I decided to do anything about it.

The facts

Here’s a quick peak of my financial situation prior to restructuring my debts and increase my HELOC:

The liabilities:

- Personal loan 25K with payment of $650

- Personal line of credit of 20K with a balance of 18K (I am paying 3,25% on this one, so I only pay $65 a month)

- HELOC of 192K with a balance of 190K (remember, I am doing a Smith Manoeuvre) with a monthly payment of $1,200

- Loan from parents of 25K, not payments required yet (agreement to pay in full in three years with an interest rate of 4,8%)

- Total debts: 260K (I do not have credit cards balance as I pay them in full on a monthly basis). for a monthly payment of $1,915.

The assets:

- Bank account : 1K

- Smith Manoeuvre investment account: 4,7K

- Stocks: 1,5K

- RRSP (mine): 6K

- RRSP (Wife): 2K

- Car: 9K

- House: 263K (last year’s appraisal value)

- Total assets: 287,2K

- Net Worth : 27,2K

While my net worth is not very impressive (I am actually not very happy about it!), when you put it in perspective of my age (26), I think it is not too bad. My goal is to use my SM investment account to pay back my parents in 3 years. I borrowed 25K from them 2 years ago. Therefore, it is a 25K loan over 5 years at 4,80%. In 3 years, I will owe them 31K with interest.

As I want to keep up with my $1,500 project I need to increase my cash flow. The interest rate I pay on my debts are all minimal since I am working for a bank. I will leave my line of credit as is since I pay only 3,25% on it. My second best interest rate is my HELOC with 4,25% (Prime rate – 2). This is why I decided to have a second appraisal done on my property to pay off some debts. We will see the result tomorrow.

If you liked this article, you might want to sign up for my FULL RSS FEED. Then, you would get my daily post in your email and can read it at any time. To subscribe, please click HERE.

If you liked this articles, you might want to sign for my FULL RSS FEEDS. Then, you will get my daily post to your email and can read it at any time. To subscribe CLICK HERE

Comments

by: Fiscal Musings | November 28th, 2007 (11:25 am)

As long as you’re aware of what you’re doing, it’ll be a good thing. Too many people just consolidate and think that the debt is gone and they can continue their out-of-control spending. It just doesn’t add up.

by: The Financial Blogger | November 28th, 2007 (4:00 pm)

FM, you are right about the “frenzy spending” most people have but I am doing it in another perspective