Personal Finance

Need help with finances

  • Last Updated:
  • Nov 19th, 2017 8:29 pm
[OP]
Newbie
Oct 2, 2017
2 posts

Need help with finances

Hi there,

I am a 58 year old female living in Toronto and I am having some issues with debt. The monthly statements come in and I can almost not bear to look at them. I was off work for almost a year after being let go from job and have used almost all of my RRSP's to stay afloat. My son said he received some great advice on this website so he is using his account for me.

-Currently my mortgage has a balance of $32,000 left (my house is worth approx $850K) with RBC paying 2.7%
-I have a line of credit with $340K paying 3% (which is maxed out)
-I have credit card debts of $15K (25%)
-I have $8K in an RRSP (which i have been withdrawing from over the past two years) and a locked in RRSP with $140K (can I access this?)
-I am currently earning about $58K per year

What I am hoping for is someone to provide some advice on my situation. Can I consolidate my debt together? Who do I go to for that information? Any help would be great, I am feeling so overwhelmed.
18 replies
Deal Addict
User avatar
Sep 15, 2009
2699 posts
1002 upvotes
Toronto
Hi there,

I'm not going to even ask how you amassed that amount of debt given you are 58 as that is somewhat irrelevant at this point (seems more than simply losing your job for a year or 2), but if you are now back on your feet from an employment stance, debt consolidation to make your payments more manageable and stream lined is certainly a good idea, assuming of course your debt servicing ratio's pan out as does your credit score. Currently you have approx 45% debt compared to your equity (Approx. home value). This means through consolidation you still have some flexibility in lumping everything together (especially the credit card debt) to reduce what you are paying in interest overall. I would seriously consider a full debt consolidation through a refinance on your home - i.e a new mortgage. This will likely achieve the lowest interest rate out there as well as force you to pay down your debts quicker. I would try as hard as I could not to take anything more from your RRSP's (or LIRA for that matter as you could technically convert 50% of it to an RRSP given you are over age 55) as you will be depleting what you have earmarked for retirement (7+ years away).

What are your household monthly expenses? Break them down.
What do you net (goes into your bank account) a month after taxes/benefits, etc?
How many years are left on your mortgage term? i.e. when does it renew?
What is your credit score?

Your first step I would imagine should be to contact a mortgage broker to discuss a refinance. I can put you in contact with one in Toronto should you require.
Newbie
Dec 7, 2016
91 posts
25 upvotes
Have you talked to your bank and gotten advice from them? Do you have a financial planner?
Member
Mar 4, 2010
379 posts
78 upvotes
Toronto
quick answer to this: refinance

there is no sense in paying your mortgage from your LoC, that is taking from one pocket and putting it into another for a higher rate. Banks love this as you are paying them for life. Consolidate your credit card and HELOC into a new mortgage, plain and simple. that 25% credit card interest is nearly 10% of your take home pay, rolling that into your mortgage converts it down to ~1%, that frees up cash flow against principal debt. Since you are working again, don't touch the RRSP anymore, you've already set back your retirement. I can only assume whichever company you've been working at was matching your RRSP with an RPP, which you've burned through 132k of.

i'm assuming the RRSP thats locked in is actually an RPP (registered pension plan) or LIRA (locked in retirement account), search the internet to see if you qualify to unlock these since you are in your late 50's. Possibly seek out a professional financial planner or an accountant to assist you with this.

Besides that, if you have excel at work or at home, simple open it up, go to 'file > new, search for templates called 'budget' and take your pick. Figure out your finances through a simple model like those will give you a better understanding. some numbers will be hard fact like mortgage payments or hydro, but take whatever you think you will spend on groceries, gas, entertainment and add 50% at the least. Are you positive or negative on your cash flow each month? if your negative, consider opening up a free bank account like tangerine. They let you have up to ten chequing accounts for free, in doing so you can have automatic transfers to set budgets for yourself for all your splurges above the basic necessities of life.

good luck
Sr. Member
Nov 13, 2013
716 posts
245 upvotes
OTTAWA
21thavage wrote:
Nov 9th, 2017 2:31 pm
Hi there,

I am a 58 year old female living in Toronto and I am having some issues with debt. The monthly statements come in and I can almost not bear to look at them. I was off work for almost a year after being let go from job and have used almost all of my RRSP's to stay afloat. My son said he received some great advice on this website so he is using his account for me.

-Currently my mortgage has a balance of $32,000 left (my house is worth approx $850K) with RBC paying 2.7%
-I have a line of credit with $340K paying 3% (which is maxed out)
-I have credit card debts of $15K (25%)
-I have $8K in an RRSP (which i have been withdrawing from over the past two years) and a locked in RRSP with $140K (can I access this?)
-I am currently earning about $58K per year

What I am hoping for is someone to provide some advice on my situation. Can I consolidate my debt together? Who do I go to for that information? Any help would be great, I am feeling so overwhelmed.
Refinance advice is good. Watch out for penalties.
Another option is to sell your house. Making $58k it doesn't make sense to live in such an expensive property. I know you bought it long ago and if in GTA it is far from extravagant but every year you live there you could be saving a lot of cash that you are soon going to need for retirement. You should clear $400k after clearing your debt. Max out your RRSP and TFSA and rent a few years and buy a small place outside the city on retirement. I don't see how you can afford to stay in the city if you retire in the next 5 or so years with these numbers. You will burn up cash and end up selling your house at 67 with no equity.

Finally you need to look at your budget to see if you can cut any expenses.
Deal Addict
Jul 11, 2008
4106 posts
1347 upvotes
Time to sell the house and downsize to a condo or a smaller house in suburbs. Also cut spending habits and live frugally.

I think the only option is to sell the house.
Sr. Member
Nov 13, 2007
805 posts
75 upvotes
Toronto
Both Mortgage and LOC has amazing rate. I wouldn't touch them.

But you need to get rid of that credit card debt ASAP. How about applying for MBNA and get the 0% balance transfer. Then, pay off the balance agressively before promotion end. Be careful, not to end up maxing out both old & new card. Or you can get 2nd HLOC.

As for the house, since you're still working in town, if you sell, you'll end up renting. And rent are not cheap those day. I wouldn't sell until I'm ready to retire & move to smaller town. How a outing renting some rooms in your house for extra income. At least, until you have debt under control.
Last edited by superping on Nov 10th, 2017 7:51 pm, edited 1 time in total.
Newbie
Sep 16, 2017
27 posts
7 upvotes
350k maxed out LOC? What on earth are you doing?

Please explain your inflows/outflows and post as to how you got to this situation. I hate when people expect help after hiding details.
Deal Fanatic
User avatar
Nov 19, 2004
7191 posts
981 upvotes
Cambridge, ON
It sounds like you are working again, so you should no longer be adding to your debt or taking out any rrsp. It is a fair amount of debt racked up somehow, but focus on that credit card debt.

Make your minimum payments on the mortgage and LOC and put everything else towards paying the credit card. If you do still have some room on your LOC then use that and pay off the credit card now. Then never carry a credit card balance again.

Once the CC debt is gone, focus on the LOC at a pace you can manage. Be aggressive, but within reason. You still have to enjoy life. Just be sure you are making progress paying it down.

As others have mentioned, refinancing your mortgage is an option if you want to consolidate the LOC and mortgage. But I like the LOC for flexibility in making extra payments if you decide to get serious.

Your locked in rrsp can just stay where it is for now. You probably could have accessed it while you weren't working, claiming some sort of hardship.

Lastly, as others mentioned, you can sell the home and downsize or move out of the city.

The above is fairly generic without understanding your expenses, but the idea remains the same.
Deal Addict
Nov 2, 2013
4806 posts
905 upvotes
Edmonton, AB
21thavage wrote:
Nov 9th, 2017 2:31 pm
Hi there,

I am a 58 year old female living in Toronto and I am having some issues with debt. The monthly statements come in and I can almost not bear to look at them. I was off work for almost a year after being let go from job and have used almost all of my RRSP's to stay afloat. My son said he received some great advice on this website so he is using his account for me.

-Currently my mortgage has a balance of $32,000 left (my house is worth approx $850K) with RBC paying 2.7%
-I have a line of credit with $340K paying 3% (which is maxed out)
-I have credit card debts of $15K (25%)
-I have $8K in an RRSP (which i have been withdrawing from over the past two years) and a locked in RRSP with $140K (can I access this?)
-I am currently earning about $58K per year

What I am hoping for is someone to provide some advice on my situation. Can I consolidate my debt together? Who do I go to for that information? Any help would be great, I am feeling so overwhelmed.
Don't know why you are worried. A lot of people are in a much worse spot. Most are horrified with the idea of debt but either forget about net worth, or being able to use debt to make money. $850K - 32000 = $818K equity in your home. You are still $463K net worth excluding the RRSPs.

Just re-mortgage that (without going to high-interest 5 year fixed products) to pay off the $340K line of credit and $15K of CCs. Sure you will have a larger mortgage but mortgage rates will be lower than the line of credit and credit cards.

An alternative is to do the above, but have as little as possible down on the new mortgage. The lender will likely make you pay off the LOC and credit cards, so do that. Then invest the difference.
Sr. Member
User avatar
Mar 9, 2012
596 posts
194 upvotes
You have proven yourself that you don't manage revolving credit very well so you'll have 2 options left. Your best option is, indeed, to refinance. You'll be looking to close your home line plan& refinance into a conventional mortgage with a 30 years amortization with as conditions to pay & close most of your revolving credit (credit cards, etc), you want to go as high as possible on the amortization to keep the payments low, it won't stop you from doing extra payments, payment increase, switch to accelerated payments or do a lump sump against the capital once a year. This is the smartest thing you can do it, let's be honest here, with your current income, you can't afford all your existing debts and your debt ratio is most likely over 40% with your current set up and you must be having issues putting any new money aside for retirement. You probably want to apply for the refinance before the new rules come into place as of January 2018. If you don't feel like doing this then you'll want to sell your house and downgrade to buy something cheaper or rent.
Member
Sep 22, 2014
246 posts
75 upvotes
Ottawa, ON
I would definitely sell and downsize to something cheaper. Unlock that equity and settle all debts. Let this be a valueable life lesson learned. You're 58, which means there aren't many working years left. The working years that are left should be focused on retirement funding.

Look at it from this perspective, in 7-8years, you'll be living a life that is mortgage-free, fixed monthly income that will be enough to cover utilities and expenses plus have some rrsp which you can use at your discretion.
Deal Fanatic
Jul 1, 2007
7891 posts
744 upvotes
Sell your grossly overvalued Toronto home and rent an apartment. This will not only allow you to take advantage of the mispricing in Toronto area real estate, but also allows you to exit before the **** hits the fan and your home loses half its value. You'll be debt free, with cash to spare. All your problems will be solved.
Money Smarts Blog wrote:
Nov 29th, 2010 11:18 am
I agree with the previous posters, especially Thalo. {And} Thalo's advice is spot on.
Sr. Member
Jan 15, 2017
608 posts
408 upvotes
Refinancing your debt at this time is a bad idea. You have $387,000 in debt, 58 years old and earn $58,000 a year. It is obvious from your current debt load that you current expenses far surpass your income. The trend of spending much more than you make and financing it with debt has to stop. You have too much debt for your income and will not be able to meet your obligations when you retire.

Sell your house and clear all your debts. If you want to own a house, buy a condo with the remaining funds. You will be mortgage free and debt free and have a small RRSP and your LIRA. You haven't provided any other assets or pension funds so I am guessing that the LIRA will be needed for your retirement. Spend the rest of your working years not getting into more debt and saving for an emergency fund.

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