They have loans of $789,200 including a home mortgage of $452,000, a mortgage on a rental unit for $225,000, $12,000 for RRSP loans, an unsecured $35,000 line of credit, and $48,200 for car loans. Their $1,955,000 of assets less $789,200 liabilities leaves them with net worth of $1,165,800.Family Finance asked Derek Moran, head of Smarter Financial Planning Ltd. in Kelowna, B.C., to work with Hank and Judy.
Cutting interest charges on their home would make it more affordable as a retirement residence, Moran points out. Selling the rental is the way to do it. The current estimated price, $550,000, less the $225,000 mortgage, leaves equity of $325,000. They paid $210,000 for it. It has a $225,000 mortgage at 2.87 per cent. After 5 per cent primping and selling costs, they would have $522,500 when sold. Take off the cost and they would be left with a $312,500 capital gain, half taxable, net $156,250.
The RRSP loan would be history, freeing up $200 per month. That $2,400 per year could go to RRSPs, avoiding the need to borrow for contributions in future, Morn notes. It’s an important saving.
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