I just finished reading the NY Times article on How to Self-Diagnose Your Financial Health and I would highly suggest you do the same. It’s kind of general guide of things that you should do on an annual basis just to make sure you stay in the loop. Currently I’m trying to calculate my net worth and finding a good calculator for that is easy.

I’ve also been testing the waters with ways to save money such as really looking hard into the cupboards and freezers of my home to figure out if I really need to go out and get more groceries? Or are there really a LOT of items that I could use at home which are likely forgotten about or simply tucked away in the back of the cupboards. I plan on posting more of this as I go along.

My current mortgage situation is that of a 5.10% interest rate for 2 more years, that said – I if I were to simply make the regular payments my mortgage would be paid off in 21 years, 7 months. That’s without any pre-payments which I try to make at least one yearly.

What’s worse is that if I was to refinance my mortgage right now – I’m stuck with a HUGE penalty of almost $5600. This is absolutely ridiculous if you ask me, but….

The new payment just sent to me is one that is variable rate and 35 years starting at 1.75% (Prime less 0.50). This makes the payment less than half of my current mortgage payment. For example if I was paying $1000 now, with this rate it would be $500.

So what advantage does that have? For me.. I see two things:

1. I keep paying the mortgage like I am right now – and I’m making a prepayment every 2 months. This would accelerate the pay down of the mortgage much faster than my current mortgage
2. With the $500 payment, it would seem that if some emergency happened that I would still be ok to ‘pay the bills’ which is obviously important.

So that’s why it’s not a crazy scenario once I took a hard look at it. Looking at this scenario again, it would appear that I would be able to make $6000 in prepayments every year without doing anything different if I kept my payments the same, and that’s without any other prepayment.

With the current mortgage that I’m in – I just calculated that for the coming 12 months I would pay over $6700 in interest! So the penalty I would incur would be a moot point really.

So what I’ve done now, is calculated what would happen if I made pre-payments of an extra $500 a month or $6000 a year on the 35 year amortization. This sounds like a lot, but in actual fact it’s no different than what I’m paying now, in fact it’s less. The results? I would have my mortgage paid off in 9 years if done bi-weekly and the rates stay the same. Obviously that’s not going to happen, but truth be told I can see them staying relatively low for at least the next 5 years, and by that time – I’ll have paid off over ½ the mortgage.

Would love to have other people comment on this idea, I don’t like jumping into any decision until I’m well informed.

I filed my taxes last week via Netfile, and generally the turnaround for the cheque to come in the mail is around 2 weeks (if I remember well). Originally, and up until today.. I was thinking that the best way thing to do would be to put it on my line of credit, now.. I’m not so sure.

It’s a sizable amount which would definitely put a dent in my line of credit – but I have to think longer term here, and I have to think realistically. You see, I’m really good at paying off my line of credit lately when I get a chance. Every spare few dollars I have is going on there, I’m living fairly frugally in hopes that I’ll get it paid off sooner than later. That said.. the whole point of the Smith Maneuver is to pay off the mortgage with the tax refunds , as well as build up a portfolio of equities and investments in order to have a great head start when it’s time to retire. So now I’m stuck.

One one hand, I think the sooner that I get the LOC paid off the more I’ll be able to put down on the mortgage and get it paid off faster – on the other hand, I’m thinking that as soon as I DO get the LOC paid off, I’ll likely end up driving it up a bit again taking a trip or something and being back at square one.. but will I do that after having paid all of that debt off?

I think I’m going to need some assistance in this decision – hopefully I get some quality comments to aid in my decision as I search the net for answers.

Pay down debt vs Pay down mortgage… which to choose?

I remember when I was purchasing my first home (back only 5 years ago this month) – I tried to take advantage of all the tax benefits I could in order to make it as much to my benefit as possible. I did get screwed over with my Mastercard program as they had me enrolled in the ‘First Homebuyers’ incentive program and I remember when I called about it… I had about $300 which I could have used, only to find out that it was only if I used BMO as my mortgage holder.. at the time, this was definitely not an option.

I did end up using my RRSP’s in order to make a down payment… I’ve touched on this before as I wasn’t 100% sure on how it worked, but now that I do, I’m really glad I took advantage. Of course I still wish I had that money in RRSP’s.. but what can you do? Perhaps my home is now worth more than the difference.. who knows.

I’ve been given the opportunity to write about the 2010 Homebuyer Tax Credits available to first homebuyers – but for our US visitors. So if you’re a Canadian – I’d suggest you take a look at the Home Buyers Plan which seems to be the only real incentive our government provides.

In the US, if you’re a first-time home buyer or you have not owned in the last three years, you can receive up to an $8,000 tax credit. What’s interesting however, is that you don’t have to BE a first time Homebuyer to take advantage.. Homeowners who have lived in a current home consecutively for 5 of the past 8 years can receive up to a $6,500 tax credit when purchasing a new home!

When you watch the following video, the ‘suit’ does a pretty good job in explaining how when someone sells a home – it creats $60,000 worth of new money into the economy, as well as creating a new job. Pretty sweet – but who really benefits? Well, that’s up to you to decide, as with most things.. if you want something.. do it.. if not, don’t! If you want to sell your home.. these are just a few things to keep in mind, it’s not a terrible thing for sure!

A few other points of interest:

• There may be no future extensions, so all qualified homebuyers are urged to act and have a written, binding contract by April 30, 2010 (close by June 30, 2010.)
• Income limits are now $125,000 for singles, $225,000 for married couples with a $20,000 phase-out of the credit for both.

In any case, I would highly suggest if you’re going to make a big purchase such as this or even if your’e thinking about it.. do your research, and see what you may qualify for. Every little bit helps!

No so, says my good accountant buddies.

Unfortunately there is no way to reduce the amount of taxes that I pay on my main BellAliant T-4 (CRAP!). You can understand my confusion.. I was hoping that I could do my little photography business on the side, and claim all of my purchased equipment, Internet, cell phone, office furniture, mortgage (portion for home office), vehicle, etc..etc..etc.

And you know.. I CAN claim all of those things.. however the deductions can’t go over the amount of money of income I take in from the side-business. For example if I only made, say $1000 for the year doing photography.. then I can only claim the amount of taxes I would pay on that. Say 30% or $300 for example. Can you say.. not worth it??

This screwed me up, I thought (stupidly now I realize) that I could claim them and they would go against my entire personal tax amount, thereby allowing me to make those claims against my BellAliant income tax as well. That would be the best thing.. ever!

Bah.. not the case.. so I’m bummed out about that, but that’s ok.. I still think it’s a great side-business and I really enjoy it.. so I’ll have to look elsewhere to find some tax deductions