Canadian Money Forum banner

41 - 60 of 80 Posts

·
Registered
Joined
·
74 Posts
Discussion Starter #41 (Edited)
Hi Everyone,
It's been quite a while since I posted an update. Things have been hectic lately. I recently passed some pretty substantial training, and have been awarded a promotion, which includes a 78% raise. I'm very thankful for that, as it will help me get this debt paid off way faster, and with this new position, there is even more opportunity for overtime. The trick for me is going to be to stay focused on putting the extra money towards debt repayment, while keeping our spending to a minimum, and avoid spending this extra money.

Last month was quite costly, as I had to pay $2500 in income tax. I work in Alberta, but live in Manitoba. My employer deducts Alberta levels of income tax from my pay cheque, but taxes in Manitoba are quite a bit higher than in Alberta. This year, I will be smarter, and contribute more to my RRSP's to avoid the tax hit next year. I currently have my motorcycle listed for sale, and am hoping to get about $2500 for it. Also, I renewed the term on my condo mortgage, as the tenants chose to renew their lease for another year. I got a good rate of 2.96% for 3 years on it. Hopefully the value of the property will go up in that time. While I was renegotiating my renewal, I was able to get the bank to stop paying the property tax on my behalf. This gives me an extra $165/month. This is good, because the bank over-estimated my property tax significantly last year, so when I renewed my mortgage, the bank cut me a cheque for the property tax money that I over-paid to them.

One thing I am wondering if anyone can give me some advice, is which debt I should pay off first? I will have about $4000 of extra cash around the end of the month (after paying all bills and credit card). The LOC is the highest interest, but I could pay off my car loan (which is 0% interest), and that would free up an extra $283/month to put towards paying off the LOC. Would it make sense to do that? Or should I just put that $4000 on the LOC right away, and keep making the $283 monthly payments on the car until it's paid off in September 2020? Thanks!

Here is an update on where we're at:

Assets:
Chequing Account: $4311
Savings: $104
RRSP: $250
TFSA: $100
RRSPL: $15 976
Work non-registered/TFSA/RRSP combined: $17 030
House: $270 000
Condo: $155 000
Total Assets: $462 771

Liabilities:
Wife Student Loan: $4700
Student LOC: $7719
House Mortgage: $233 060
Condo Mortgage: $134 414
LOC: $49 200
Car Loan: $4154
SUV Loan: $25 346
Credit Card: $1841 (I pay it off in full every month)
Total Liabilities: $460 434

Net Worth: $2337 (finally in the green!)
 

·
Registered
Joined
·
1,783 Posts
If the LOC is still anywhere near 7% (as you said aways back), I'd pay it first. Paying $4,000 on it will start saving 7% on that amount right away.
 

·
Registered
Joined
·
10,047 Posts
If the LOC is still anywhere near 7% (as you said aways back), I'd pay it first. Paying $4,000 on it will start saving 7% on that amount right away.
Agree completely if interest rate remotely approaches 7%. There is a huge amount of debt there to retire. Do the highest interest rate first.

Added later: If I recall correctly, your rental property was not cash flow positive if you included all costs. Why would you have not put it up for sale about 3 months before tenant lease was up, rather than carry it 'cash in red' for another year? Why do you assume it will go up in value over this next year?
 

·
Registered
Joined
·
357 Posts
Whatever the highest interest rate is.... put the money there.....

$4,000 @ 7% is $280 / Yr that you dont pay out anymore... so that means that you are effectively saving $280 / yr of taxed income.... or paying down the LOC $280 / Yr faster.... (if your payments stay the same.)
 

·
Registered
Joined
·
74 Posts
Discussion Starter #45
In Manitoba, you can't just choose not to renew the tenant's lease. You are legally required to offer them a lease renewal 3 months before the end of the existing lease. If you don't, then the lease automatically renews on a month-month basis. The only way you can get your property back is if you decide to move back into the place yourself, you sell it and the buyer is going to move in, or you are going to perform major renovations (in which case, once the renovations are complete, you are required to let them move back into the place).

I figured to try selling it with them still living there would be a huge pain, considering how slow the Winnipeg condo market is in the first place.

I was able to get the bank to stop taking about $165/monthly for my property tax, so I am no longer giving the bank an interest free loan with that money at least, so I just pay $1800 in a lump sum payment to the city for my property tax each year. I am increasing the rent each year as well.



If the LOC is still anywhere near 7% (as you said aways back), I'd pay it first. Paying $4,000 on it will start saving 7% on that amount right away.
Agree completely if interest rate remotely approaches 7%. There is a huge amount of debt there to retire. Do the highest interest rate first.

Added later: If I recall correctly, your rental property was not cash flow positive if you included all costs. Why would you have not put it up for sale about 3 months before tenant lease was up, rather than carry it 'cash in red' for another year? Why do you assume it will go up in value over this next year?
 

·
Registered
Joined
·
36 Posts
Congratulations on decreasing your debt by almost 15K since you started this thread. You are moving in the right direction and that's awesome. One thought is when is your mortgage due? If it's soon you might be able to add the higher interest debt to the mortgage and lower the interest rate. If you do that reduce the LOC to a very small amount. LOC are to easy to use and can be dangerous if you are not careful. Make sure that you can make Principal payments anytime. Banks have lots of different mortgage products and it's worth the conversation. Don't rush into this. The best thing to do is develop good money habits and it looks like you're moving in that direction.
 

·
Registered
Joined
·
74 Posts
Discussion Starter #47
Thank you! That's good advice! My mortgage is not due for renewal for another 2 years yet, so I will keep that in mind. With my new position, I will be taking home about an extra $2000/month (not including OT), and I plan on putting pretty much all of that money towards debt repayment. So I'm hoping to be able to quickly chop down this mountain of debt.


Congratulations on decreasing your debt by almost 15K since you started this thread. You are moving in the right direction and that's awesome. One thought is when is your mortgage due? If it's soon you might be able to add the higher interest debt to the mortgage and lower the interest rate. If you do that reduce the LOC to a very small amount. LOC are to easy to use and can be dangerous if you are not careful. Make sure that you can make Principal payments anytime. Banks have lots of different mortgage products and it's worth the conversation. Don't rush into this. The best thing to do is develop good money habits and it looks like you're moving in that direction.
 

·
Registered
Joined
·
10,047 Posts
In Manitoba, you can't just choose not to renew the tenant's lease. You are legally required to offer them a lease renewal 3 months before the end of the existing lease. If you don't, then the lease automatically renews on a month-month basis. The only way you can get your property back is if you decide to move back into the place yourself, you sell it and the buyer is going to move in, or you are going to perform major renovations (in which case, once the renovations are complete, you are required to let them move back into the place).

I figured to try selling it with them still living there would be a huge pain, considering how slow the Winnipeg condo market is in the first place.
You are going to have to do that eventually if your tenants never decide to leave. Are you prepared to be cash flow negative until perhaps 2025? When do you stop the bleeding? I only did cursory mental math in my head from your numbers on the opening page of this thread, but it seems you have to be in the red by hundreds of dollars per month (mortgage, condo fee, property taxes, property insurance, repairs). The condo market could actually get worse.

Landlords sell properties on an ongoing basis all the time. I don't know anything about Winterpeg, but I would sell it when 'timing' is right rather than when the lease expires and hoping the tenants won't renew.

P.S. I'd never be a landlord in a province where I cannot terminate the lease upon completion of the term. Well, actually, I'd never be a landlord at all.

P.P.S I second Gruff's encouragement on good progress! You are coming out of what was a pretty big hole. Lesson learned?
 

·
Registered
Joined
·
74 Posts
Discussion Starter #49
Those are good points. Perhaps I will look at selling the property next Spring. I'm currently paying off about $5500/year in mortgage principal on the rental property. However, yes, on a monthly basis, I am down about $170/month with all expenses added up. I am increasing the rent by the maximum allowable amount each year, so that monthly loss is slowly shrinking.

Yes, lesson definitely learned! My goal is to pay off about $25 000 of the LOC over the next 12 months. Perhaps more, but I know $25 000 is doable. 12 months is somewhat of a long time, so I've split that goal up into quarters. So by the end of August, my goal is to have about $7000 paid off. Try to get the balance down to $42 000 by the end of August. I'll just keep focused on my goals one quarter at a time, and watch this mountain of debt slowly crumble.

You are going to have to do that eventually if your tenants never decide to leave. Are you prepared to be cash flow negative until perhaps 2025? When do you stop the bleeding? I only did cursory mental math in my head from your numbers on the opening page of this thread, but it seems you have to be in the red by hundreds of dollars per month (mortgage, condo fee, property taxes, property insurance, repairs). The condo market could actually get worse.

Landlords sell properties on an ongoing basis all the time. I don't know anything about Winterpeg, but I would sell it when 'timing' is right rather than when the lease expires and hoping the tenants won't renew.

P.S. I'd never be a landlord in a province where I cannot terminate the lease upon completion of the term. Well, actually, I'd never be a landlord at all.

P.P.S I second Gruff's encouragement on good progress! You are coming out of what was a pretty big hole. Lesson learned?
 

·
Registered
Joined
·
74 Posts
Discussion Starter #50
Alright, so a small update. I switched our banking to Tangerine, and will save $11/month in fees. Also, the chequing account/savings account have a higher interest (still very low, but better than nothing I suppose). I also made a $3300 lump sum payment on my LOC, which felt great. Yesterday, I had a $190 unexpected vehicle repair, but that's life I suppose. Two wheel studs broke off, so didn't have much of a choice in getting it fixed. Thankfully it didn't end worse. I also spent $240 on a new weed whacker, after my cheap, low quality one bit the dust. It was on sale, and came with a 2-year warranty at least. It's a STIHL, so hopefully it will last for many years. I have a $1900 property tax payment coming up, and a $100 speeding ticket (which was originally $250, that I got back in December for going 12 km/h over the limit. I got it reduced to $100, and got the due date extended until the end of June). Otherwise, things are going well, and I expect to be able to continue paying off about $1600/month off my LOC, if I don't do any OT. Any OT I pick up will go directly to the LOC, to try to get it paid off as quickly as possible.
 

·
Registered
Joined
·
74 Posts
Discussion Starter #51
Monthly update:
Assets:
House - $270 000
Condo - $155 000
Chequing - $3491
Savings - $404
RRSP - $250
RRSPL - $16 484
Work non-registered, TFSA, RRSP combined - $14 389
Total Assets: $460 018

Liabilities:
Wife student loan - $4600
Student LOC - $7755
House Mortgage - $232 393
Condo Mortgage - $133 982
Credit Card - $2879
Car Loan - $3871
SUV Loan - $24 897
LOC - $45 839
Total Liabilities: $456 212

Net Worth: $3806
 

·
Registered
Joined
·
74 Posts
Discussion Starter #52
July update:
Assets:
House - $270 000
Condo - $155 000
Chequing - $1045
Savings - $455
RRSP - $250
Non-Registered - $250
RRSPL - $16 166
Work non-registered, TFSA, RRSP combined - $15 580
Total Assets: $458 746

Liabilities:
Wife student loan - $4500
Student LOC - $7620
House Mortgage - $231 708
Condo Mortgage - $133 539
Credit Card - $2953
Car Loan - $3588
SUV Loan - $24 449
LOC - $45 000
Total Liabilities: $453 357

Net Worth: $5389
 

·
Registered
Joined
·
74 Posts
Discussion Starter #53
Made a substantial step today. Sold my motorcycle. Wasn't easy mentally, but I got pretty much what I was asking for it, and I put the money directly on my line of credit, which felt good.
 

·
Registered
Joined
·
74 Posts
Discussion Starter #54
August update:

Assets:
House - $270 000
Condo - $155 000
Chequing - $1225
RRSP - $250
Non-Registered - $250
RRSPL - $16 286
Work non-registered, TFSA, RRSP - $16 690
Total Assets: $459 701

Liabilities:
Wife studen loan - $4400
Student LOC - $7655
House Mortgage - $231 038
Condo Mortgage - $133 104
Credit Card - $1844
Car Loan - $3305
SUV Loan - $24 000
LOC - $42 450
Total Liabilities: $447 796

Net Worth: $11 905
 

·
Registered
Joined
·
74 Posts
Discussion Starter #56
Thanks, Peter! About $3400 in my non-registered account at work will be maturing in about 2 weeks. I'll be taking that and putting it directly on the LOC. We've got a baby on the way (due in January), so getting this debt paid off is top priority. As far as possessions go, we have sold a tonne of stuff on kijiji already. We now have a pretty minimal amount of possessions. I'm going to my Sister's wedding next week half way across the country, and I have a trip to San Francisco coming up this month for a competition with one of my hobbies (which I'm doing as much on the cheap as possible), and that will be about it for large expenses until the baby comes. We will make about $800 more than we spend this month (mostly due to the wedding and trip to SFO)....Next month, and going forward until January, we will be taking in about $2000/month more than we are spending. This excess money will be going straight to the LOC. Also, the full $17 000 in my work savings will be maturing in the next few months, and I plan to put all of it (except for the small amount that's in RRSP) on to the LOC. I'm hoping to have the LOC completely paid off by next summer, or hopefully sooner, depending how much OT I can pick up.
 

·
Registered
Joined
·
74 Posts
Discussion Starter #57
September update. Making some headway, and it feels great! January will be one year into this, and we are on track to have made a huge improvement in 2019!

Assets:
House - $270 000
Condo - $155 000
Chequing - $1758
Savings - $650
RRSP - $250
Non-Registered - $253
RRSPL - $17 507 (made some decent gains here selling stock. Reinvested in TD, RY, CU and FTS. Held on to WFT.)
Work non-registered/TFSA/RRSP combined - $14 312 (cashed out some non-vested money from non-registered to pay off LOC. Planning to keep doing this every 3 months, as money becomes non-vested. Doesn't cost me anything to do this.)
Total Assets: $459 730

Liabilities:
Wife Student Loan - $4350
Student LOC - $7605
House Mortgage - $230 367
Condo Mortgage - $132 669
Credit Card - $746
Car Loan - $3022
SUV Loan - $23 550
LOC - $38 590
Total Liabilities: $440 899

Net Worth: $18 831
 

·
Registered
Joined
·
74 Posts
Discussion Starter #58
October update:

Assets:
House - $270 000
Condo - $155 000
Chequing - $3225
Savings - $926
RRSP - $250
Non-registered - $270
RRSPL - $17 774
Work non-registered/TFSA/RRSP combined - $15 619
Total Assets: $463 064

Liabilities:
Wife Student Loan - $4300
Student LOC - $7554
House Mortgage - $229 677
Condo Mortgage - $132 222
SUV Loan - $23 101
Car Loan - $2739
LOC - $38 390
Credit Card - $2141
Total Liabilities: $440 124

Net Worth: $22 940
 

·
Registered
Joined
·
74 Posts
Discussion Starter #59
Looking for some advice! So the payments for my car loan are $283/month. That loan is scheduled to be paid off next September. I have enough money in the bank to pay it off completely right now. That loan is 0% interest. Would it be worth it to pay off my 0% car loan all at once right now, that so it frees up an extra $283/month for payments to my LOC?
 

·
Registered
Joined
·
1,528 Posts
Looking for some advice! So the payments for my car loan are $283/month. That loan is scheduled to be paid off next September. I have enough money in the bank to pay it off completely right now. That loan is 0% interest. Would it be worth it to pay off my 0% car loan all at once right now, that so it frees up an extra $283/month for payments to my LOC?
No. Keep on paying the 283/mo and use the excess cash to hit the LOC now.
Then when the car loan is paid off, transfer that 283 to the LOC as well.
 
41 - 60 of 80 Posts
Top