November 30, 2007, 8:00 am

Restructuring My Debts Through My Property Part 3

by: The Financial Blogger    Category: Pay off your Debts,Project $1500
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It is now the third day in a row that I am stripping my financial situation to my readers. By now, I feel that you probably know more about how I manage my personal finance than my own banker and accountant put together 😉 But I really think that there is no such things but real examples to help others managing their personal finance. While I do not pretend that I know the very secret of financial freedom, I am definitely after it! And if I ever succeed, you will be the first ones to know about it!
The results

The very first thing I was happy with was the fact that my property increased in value and was now at 275K. That is bringing my net worth a little bit over 39K. With a little help of my bonus, I will finish the year 2007 slightly over 40K. If you recall from my first post about restructuring my debts, I had monthly obligations of $1,915. With the new HELOC, I will have a minimum payment of $780 a months if I was to decide to pay interest only (I pay only 4,25% on my HELOC). However, I decided to make a monthly payment of $1,500. Therefore, I would decrease my monthly payment by $415, not bad huh?

Unfortunately, the whole $415 will not be applicable on my $1,500 project. As I previously mentioned, I quit my second job in July but I never replaced this income. Therefore, I will have to come back with additional calculation in regards to my project. The good news is that I know that it will still decrease my overall payment and definitely enable me to increase my saving capacity.

Starting in January, I will be able to put back my original monthly investment with my Smith Manoeuvre, About two months ago, I had to decrease my investment in order to increase my available cash flow. I dropped it down to $400 even thought I did not like the idea of getting late in my parents loan repayment schedule. By investing $600 on a monthly basis, I am assured to be able to pay at least the 25K in capital back in three years. In regards to the interest, I would just have to continue paying them back for another year in the very worst case scenario.

In the best scenario ever, The Bank of Canada will decrease their rate (I heard rumours that it might happen shortly!) and prime rate would drop to 6%. This mean that I will pay only $733 in interest and that I will be able to increase my Smith Manoeuvre payment up to $700. This would definitely facilitate my loan repayment and I would only have a mortgage and a very cheap line of credit left at the age of 30 (Hum… this will be time for a BMW then ;-D). I told you, I am not very frugal 😉

I am well aware that I will be paying more interest over time with this technique. However, I give more importance to my present lifestyle than my future interest payment. I see personal finance more on a cash flow management perception than an absolute way to create wealth. If I can manage to have my wife stay at home next year, I will surely be more happy than if I save a couple of thousand dollars in interest charges!

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How were you able to get a HELOC at 4.25%!?!? Wow. I have one at prime, and I haven’t heard of anything lower than that. Good for you. Please do tell!

by: The Financial Blogger | December 2nd, 2007 (3:02 pm)

Hi Trevor, HELOC at 4.25% do not exist. It is because I have a rebate since I am a banker myself. However, a part of it count as a taxable benefit.

[…] They even offer a free financial consultation service on their first page. Unfortunately, I did not tried it as I don’t have any debts to pay off since I recently restructure my debts trough my property. […]

[…] month.I will probably increase my SM payment this year as I was able to free up some cash flow by restructuring my debts through my property.In the end, I am quite satisfied with this first year using the Smith Manoeuvre as it has been a […]

[…] recently restructured my debts through my property. I knew that my house increased in value and I wanted to benefit from the equity sleeping in it. […]