A home equity line of credit can be a key component to simplify the sometime complicated process of financial planning. A recent Financial Post article examines a complex yet all too common financial planning scenario – how to pay down a mortgage on one income while simultaneously making RESP contributions for children, RRSP contributions for retirement, and juggling an investment portfolio.
The insightful article, by the Financial Post’s Andrew Allentuck, examines the mortgage, loan and tax implications and strategies that are available to tackle what may be a seemingly insoluble situation to the average householder. Of course, advice from a financial planner helps cut through the multitude of options that are available.
One part of the solution in this scenario was swapping a $5000 personal line of credit for a $100,000 secured home equity line of credit. The secured line of credit has the advantages of a much more favourable interest rate if it becomes necessary to fall back on the facility for emergency needs. Additionally, financial Planner Derek Moran, of Smarter Financial Planning Ltd. in Kelowna, also demonstrates how in some instances a low interest rate home equity line of credit can be used as a stopgap measure to make higher rate mortgage payments while financial resources are redirected to make tax favourable RESP and spousal RRSP payments.
Of course the scenario that the article examines is highly specific and would not necessarily apply to most households. But it does demonstrate that there are strategies and financial products available that most homeowners may not have considered. It also demonstrates how the expertise of financial professionals – such as a certified financial planner or experienced mortgage broker – can cut through seemingly insoluble financial problems and conflicting priorities to come up with financial solutions that a homeowner may never have considered.
