3-minute read

Planning a trip, major purchase or home renovation? Laurentian Bank Senior Business Development Manager for Private Banking Kévin Charbonneau D. recommends speaking with an advisor about your plans as early as possible. “Together, based on your project, timeline and financial situation, you can agree on a strategy that can combine savings, credit and financing” he says. We’ve prepared two scenarios which highlight the importance of planning to meet your goals.

Scenario 1: Viviane’s bike trip.

Project: Cycling trip from Montreal to the Maritimes

Estimated cost: $5,000

Time horizon: Within 6 months

Available funds: None (Viviane prefers not to touch her Tax-Free Savings Account (TFSA), which serves as her emergency fund)

Recommendation: Credit card and line of credit

Effortless saving.

Many credit cards offer cash back of 1% to 3%. With annual transactions totalling about $20,000, Viviane could accumulate the equivalent of $100 to $300 over the next six months, followed by an additional $50 to $150 by paying all the expenses incurred during her trip with her credit card.

Choose the credit card that suits you best

Minimize interest.

“The trip can be financed without paying any interest until the credit card statement due date, and then the entire balance paid off using a line of credit to transfer the debt to a product with a lower interest rate,” suggests Kévin Charbonneau D. “However, it is important to plan the repayment of the line of credit before it is used.”

“It’s better to first assess how much you can repay each month, then determine how much you can borrow on your line of credit — not the other way around.”

Kévin Charbonneau D.

Meanwhile, Viviane’s TFSA, which she prefers to keep for emergencies, continues to earn interest.

Scenario 2: Charlie’s future kitchen.

Project: Full kitchen remodel

Estimated cost: $35,000

Time horizon: Within 3 years

Available funds: None, but can save $75/week

Recommendation: Savings and mortgage financing

Adopt good saving habits.

By setting up an automatic transfer of $75 per week to a Laurentian Bank High Interest Savings Account (HISA), Charlie ensures that he receives a competitive interest rate¹ risk-free. After two and a half years, this slight adjustment to his budget could help him set aside more than $10,000.

Open a HISA with Laurentian Bank

Each time he reaches $500 of savings in his HISA, he could also reinvest it in Guaranteed Investment Certificates (GICs). Because his time horizon is 3 years, when his GIC reaches maturity, he may benefit from an even higher rate than the HISA.

“The realization of this short-term project depends more on the capital saved than on the return earned. It is therefore safer to choose an investment product with guaranteed capital than to try to realize a high gain on the stock markets.”

Kévin Charbonneau D.

Financing to make up the difference.

In the third year, six months before his project, Charlie could use the renewal of his mortgage to free up additional funds from the value of his property. “A Home Equity Line of Credit (HELOC) provides maximum flexibility. Withdrawals can be made as work on the project progresses and interest is only calculated on the amount of funds used,” explains the advisor. In addition, since the property is used as collateral, the cost of borrowing is much lower than with a personal loan.

Alternatively, Charlie could apply for a second mortgage² of $25,000. To qualify, however, the market value of the property must be at least 20% higher than the mortgage balance, either because of the repayments made or because the property appreciated.

“This equity-based approach is less flexible, but often results in a better rate, allows repayment over a longer period to reduce monthly payment amounts, and provides more stability to the budget.”

Kévin Charbonneau D.

After two and a half years of saving $75 a week for his project, Charlie can now allot the same amount—or even a little more—to repaying his loan.

Learn about our Homeowner’s Kit

Your partner for project planning.

As soon as the thought of a trip, renovation or any other project arises, speak to a Laurentian Bank advisor. Together, you can assess all possible solutions and agree on the best strategy for your goals. Teaming up with you to help you achieve your projects and ambitions – that’s what it means to see beyond numbers!

Book a meeting with an advisor