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Burlington and surrounding areas.
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We are happy to announce that some exciting changes are coming soon to our site.
Please continue to visit over the next few months!
Tax Efficient Mortgage PLANS
Be Mortgage-Free Faster and Tax-efficient...with Tax-Efficient Debt!
Many of my clients try to save for their retirement (often with RRSPs) but cash flow is sometimes a problem. The mortgage payments, insurance, cars, children, trips, house renovations, etc. all take a toll.
Most people want just a few financial goals. The first is to retire early. The second is "pay off the mortgage as soon as possible" . The problem is by the time they pay off their mortgage, they are looking to buying a new house with a new larger mortgage! Then by the time they are in their 40's they realize they are falling short. By the the time they are in their 50's freedom 55 is a dream. Their children are in university and they have not made their normal RRSP contribution for years! If they don't have a pension that they have been in for thirty years they are in trouble!
Now you can use something called Tax-Efficient Debt.
In a nutshell you convert your "bad debt" - your mortgage, car payments etc. - into "good debt" for which you can write off the interest payments. As you pay down your mortgage you reborrow the same amount and invest it in a conservative mutal fund; the interest is tax deductible (as long as you expect to earn income which the mutual funds would qualify for under the rules of the CRA). If this is done correctly you could convert your 20 year mortgage in as little as 12 years or less.
The idea of a Tax Efficient Mortgage actually has been around for a long time. Until recently, though, it has been very difficult and time-consuming to administer. Now, with a licensed mortgage broker who works with a certified financial planner, you have some new mortgage products from the big banks and some very tax effective conservative mutual funds that can make this happen. Some refer to this as a "Tax-Deductible Mortgage" but currently, the Tax-Deductible Mortgage does not technically exist in Canada. However, this strategy is very close!
Who is this best for?
In my opinion, someone with good credit could be a candidate for a Tax-Efficient Debt. For example, someone with good family income, at least 25% equity in their home and has their spending habits under control should talk to me about this mortgage option. You must also be comfortable with volatility in the markets.
What if I am in the middle of a mortgage term?
In some cases it may make sense to pay a penalty, but this must be determined on a case by case basis. Most penalties may be three months' interest on your mortgage. In many cases where other debt can be added to the mortgage the penalty is a small price to pay.
What are the risks?
This is something most Tax-Efficient Debt "experts" do not talk about...but I do.
Case Study: Tax-Efficient Debt Benefits It's true - your mortgage can be tax-efficent! (note that this is not the same as tax-deductible). So how can this technique help you? Let's look at a case study. Our example family consists of:
In addition, John and Nancy replace their vehicle every six or seven years, at a cost of about $30,000. They begin to realize that at about 60 years of age they will probably still be in debt!
Solution: John and Nancy have their financial planner set up their mortgage to be tax efficient. Using Tax-Efficient Debt, John and Nancy could be mortgage-free in 6.75 years vs 15 years - while still making the same monthly payments on their mortgage ($1,225 per month). John and Nancy become mortgage-free years before their children go to university, allowing the family to save the money they need to pay for education.
Ready to see how a Tax-Efficient Debt can work for you? Contact me today to learn more and get started! † Case Study 2 Now let's look at a family of a slightly older age, with a different set of financial abilities and obligations.
David hopes to retire at age 60 but lately his RRSP contributions have dropped to about $5,000 per year. His planner has told him that, at an 8% return, his RRSPs will be worth about $852,000.
If they wish to have about 75% of his current income (excluding government payments like CPP and OAS) they will need to take out about $77,000 per year (assuming 2% inflation). That means they will be out of money by age 77! If the RRSP contributions drop much lower, David may have to postpone his retirement to age 65.
Solution: David and Lisa have their Certified Financial Planner set up both their house and cottage mortgages to be tax efficient. If they do this, they can buy the new car and give Kate $25,000 for her condo and still be debt-free in less than six years, even at a higher interest rate of 6%! This would put them in a better position to retire at David's target age of 60.
To get a better picture of your own financial situation, try my free RIF Calculator.
As a result of this plan, millions of investment dollars have been moved from "bank planners" who focus on investments only with no regard to clients' most important debt, the mortgage.
If your mortgage is arranged through a broker, you are probably getting a mortgage and only a mortgage. Brokers are not likely to examine your situation and suggest other products you may need, such as a line of credit. Because I am a CFP, I will take your overall financial picture into consideration when arranging your mortgage, and direct you to other products and services suited to your particular goals.
Already in a Mortgage? I can still help you save thousands over the mortgage term! Even if your bank charges a short-term penalty for moving your mortgage, the savings over the years could make it well worth your time to change your mortgage plan. We will carefully examine your situation and determine the best course for you.
Even if you don't currently have a mortgage, you should contact me. I can show you how to save thousands of dollars on your taxes.
If you're ready to use Tax-Efficient Debt to structure your mortgage debt to be more tax-efficient, we can work with your existing cash flow. There's no need to change the amount you're currently putting toward paying down your mortgage. In addition, you can maintain your existing relationships - you can stay with your current bank, broker, etc.
Free Initial Consultation As a Certified Financial Planner specializing in Tax-Efficient Debt strategies, I would welcome the opportunity to meet with you and further explain how this strategy could be beneficial to you. This meeting is completely free and there are no fees for setting up the mortgage. Please call me at 905 338-7689. Let me show you what thousands of other Canadians already know - how to be mortgage-free faster...and tax-efficient!
Sincerely,
Brian Poncelet, CFP
(905) 338-7689 (24hrs)
brian@mortgageplans.ca
One Final (but VERY IMPORTANT) Point! BEFORE you get a mortgage, be aware that your bank may try to sell you mortgage insurance. However, a Personal Life Insurance policy to cover your mortgage may well be the better choice for you. Read more here.
Owing to limited resources and time commitment, only people with family incomes of $110,000 or more should call. (OR $60,000 in RRSPs)
P.S. All clients will receive a customized plan on "Rapid Mortgage Pay Down Strategy" (no change to the monthly mortgage payment).
Pssst. Even if you are in the middle of a mortgage, call to review your options!
† To set this up properly, a written plan should be drafted by a certified financial planner and a proper mortgage used. Please feel free to call me to discuss your situation. Note that Tax-Efficient Debt" are not suitable for everyone. Factors that may affect your ability to benefit from the strategy include:
• Leverage - if one has less than a seven year time frame
• Market risk (day-to-day fluctuations) - if one is involved with only GIC/cash, rather than mutual funds or stocks
• Low tax bracket
• Poor credit
Understand that leverage can magnify gains or loses (this is why only conservative investments should be considered). Finally, please review the Legal link for additional important information.
Most people want just a few financial goals. The first is to retire early. The second is "pay off the mortgage as soon as possible" . The problem is by the time they pay off their mortgage, they are looking to buying a new house with a new larger mortgage! Then by the time they are in their 40's they realize they are falling short. By the the time they are in their 50's freedom 55 is a dream. Their children are in university and they have not made their normal RRSP contribution for years! If they don't have a pension that they have been in for thirty years they are in trouble!
Now you can use something called Tax-Efficient Debt.
In a nutshell you convert your "bad debt" - your mortgage, car payments etc. - into "good debt" for which you can write off the interest payments. As you pay down your mortgage you reborrow the same amount and invest it in a conservative mutal fund; the interest is tax deductible (as long as you expect to earn income which the mutual funds would qualify for under the rules of the CRA). If this is done correctly you could convert your 20 year mortgage in as little as 12 years or less.
The idea of a Tax Efficient Mortgage actually has been around for a long time. Until recently, though, it has been very difficult and time-consuming to administer. Now, with a licensed mortgage broker who works with a certified financial planner, you have some new mortgage products from the big banks and some very tax effective conservative mutual funds that can make this happen. Some refer to this as a "Tax-Deductible Mortgage" but currently, the Tax-Deductible Mortgage does not technically exist in Canada. However, this strategy is very close!
Who is this best for?
In my opinion, someone with good credit could be a candidate for a Tax-Efficient Debt. For example, someone with good family income, at least 25% equity in their home and has their spending habits under control should talk to me about this mortgage option. You must also be comfortable with volatility in the markets.
What if I am in the middle of a mortgage term?
In some cases it may make sense to pay a penalty, but this must be determined on a case by case basis. Most penalties may be three months' interest on your mortgage. In many cases where other debt can be added to the mortgage the penalty is a small price to pay.
What are the risks?
This is something most Tax-Efficient Debt "experts" do not talk about...but I do.
Case Study: Tax-Efficient Debt Benefits It's true - your mortgage can be tax-efficent! (note that this is not the same as tax-deductible). So how can this technique help you? Let's look at a case study. Our example family consists of:
- John Smith (age 45). Occupation: teacher. Income: $70,000. Pension: Yes, 15 years of contributions
- Nancy Smith (age 42). Occupation: self-employed. Income: $40,000. Pension: No
- Children: Mark (age nine), Sally (age eight)
- Mortgage: $150,000 (5.5%). $1,225 per month (property taxes extra)
- RRSPs: $60,000 (contributions of $400 to $800 per month)
- RESP: $4,000 (contributions of $200 per month)
In addition, John and Nancy replace their vehicle every six or seven years, at a cost of about $30,000. They begin to realize that at about 60 years of age they will probably still be in debt!
Solution: John and Nancy have their financial planner set up their mortgage to be tax efficient. Using Tax-Efficient Debt, John and Nancy could be mortgage-free in 6.75 years vs 15 years - while still making the same monthly payments on their mortgage ($1,225 per month). John and Nancy become mortgage-free years before their children go to university, allowing the family to save the money they need to pay for education.
Ready to see how a Tax-Efficient Debt can work for you? Contact me today to learn more and get started! † Case Study 2 Now let's look at a family of a slightly older age, with a different set of financial abilities and obligations.
- David Wilson (age 51). Occupation: self-employed. Income: $85,000. Pension: No
- Lisa Wilson (age 52). Occupation: none. Income: $0. Pension: No
- Children: Kate, age 23. Has left home but may still need financial assistance
- House Mortgage: $85,000 (5%). $554 bi-weekly (property taxes extra)
- Car loan: $30,000 (0%). $400 per month
- RRSPs: $350,000 (contributions of $400 to $800 per month)
- Cottage Mortgage: $20,000 (4.75%). $285 per month
David hopes to retire at age 60 but lately his RRSP contributions have dropped to about $5,000 per year. His planner has told him that, at an 8% return, his RRSPs will be worth about $852,000.
If they wish to have about 75% of his current income (excluding government payments like CPP and OAS) they will need to take out about $77,000 per year (assuming 2% inflation). That means they will be out of money by age 77! If the RRSP contributions drop much lower, David may have to postpone his retirement to age 65.
Solution: David and Lisa have their Certified Financial Planner set up both their house and cottage mortgages to be tax efficient. If they do this, they can buy the new car and give Kate $25,000 for her condo and still be debt-free in less than six years, even at a higher interest rate of 6%! This would put them in a better position to retire at David's target age of 60.
To get a better picture of your own financial situation, try my free RIF Calculator.
The Right Plan for Your Needs
For the past twelve years, I have been helping people like yourself to save thousands on their mortgage
every year with no change to the monthly mortgage payment. I am one of a few, independent
Certified Financial Planners (CFPs) in Southern Ontario who provides each client with a free hard copy
financial plan ($549 value!) focused on your mortgage (OFFER GOOD UNTIL February 22, 2007 ONLY).
As a result of this plan, millions of investment dollars have been moved from "bank planners" who focus on investments only with no regard to clients' most important debt, the mortgage.
If your mortgage is arranged through a broker, you are probably getting a mortgage and only a mortgage. Brokers are not likely to examine your situation and suggest other products you may need, such as a line of credit. Because I am a CFP, I will take your overall financial picture into consideration when arranging your mortgage, and direct you to other products and services suited to your particular goals.
Already in a Mortgage? I can still help you save thousands over the mortgage term! Even if your bank charges a short-term penalty for moving your mortgage, the savings over the years could make it well worth your time to change your mortgage plan. We will carefully examine your situation and determine the best course for you.
Even if you don't currently have a mortgage, you should contact me. I can show you how to save thousands of dollars on your taxes.
If you're ready to use Tax-Efficient Debt to structure your mortgage debt to be more tax-efficient, we can work with your existing cash flow. There's no need to change the amount you're currently putting toward paying down your mortgage. In addition, you can maintain your existing relationships - you can stay with your current bank, broker, etc.
Free Initial Consultation As a Certified Financial Planner specializing in Tax-Efficient Debt strategies, I would welcome the opportunity to meet with you and further explain how this strategy could be beneficial to you. This meeting is completely free and there are no fees for setting up the mortgage. Please call me at 905 338-7689. Let me show you what thousands of other Canadians already know - how to be mortgage-free faster...and tax-efficient!
Sincerely,
Brian Poncelet, CFP
(905) 338-7689 (24hrs)
brian@mortgageplans.ca
One Final (but VERY IMPORTANT) Point! BEFORE you get a mortgage, be aware that your bank may try to sell you mortgage insurance. However, a Personal Life Insurance policy to cover your mortgage may well be the better choice for you. Read more here.
Owing to limited resources and time commitment, only people with family incomes of $110,000 or more should call. (OR $60,000 in RRSPs)
P.S. All clients will receive a customized plan on "Rapid Mortgage Pay Down Strategy" (no change to the monthly mortgage payment).
Pssst. Even if you are in the middle of a mortgage, call to review your options!
† To set this up properly, a written plan should be drafted by a certified financial planner and a proper mortgage used. Please feel free to call me to discuss your situation. Note that Tax-Efficient Debt" are not suitable for everyone. Factors that may affect your ability to benefit from the strategy include:
• Leverage - if one has less than a seven year time frame
• Market risk (day-to-day fluctuations) - if one is involved with only GIC/cash, rather than mutual funds or stocks
• Low tax bracket
• Poor credit
Understand that leverage can magnify gains or loses (this is why only conservative investments should be considered). Finally, please review the Legal link for additional important information.