Family Finance asked Derek Moran, head of Smarter Financial Planning Ltd. of Kelowna, B.C., to work with Christopher and Melissa. His view – with debt management and enhanced returns on their assets, they can make it.First move — use a Home Equity Line of Credit, a HELOC, to reduce interest on $12,000 in outstanding credit card loans they have used for home renovations. They pay $1,000 per month on their credit cards at about 19 per cent interest.
If they sell, the gain in value would be $650,000 less $178,000 or $472,000. They would also incur $35,000 selling costs, for a net gain of $178,000. They have owned it for 14 years during which they lived in it for two years, so 21 per cent or $91,770 would be tax-free.Article content After paying off the mortgage and the selling costs, the proceeds of the sale would be $476,000. Subtract the tax bill and the amount dedicated to their RRSPs and they would have an additional $323,580 — more than enough to acquire a piece of land for retirement.
The couple will be able to rely on Christopher’s $4,126 monthly defined benefit pension, estimated CPP for Christopher at 80 per cent of the present maximum $15,043 per year and 90 per cent for Melissa. That’s $12,034 per year for Christopher and $13,539 for Melissa.
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