Are you planning a project that requires the wise use of your money? A new home, the arrival of a child, a sabbatical year, a change of job, the settlement of your debts or retirement?
Audrey and Guillaume want to adopt two children in Thailand. This heart project will cost a total of $ 60,000. The couple is looking for the most judicious way to finance it.
For several years, Audrey and Guillaume tried to have children. But even science could not help them.
“We both have fertility problems. We did an in vitro fertilization trial that cost us $ 10,000. As I have a diminished ovarian reserve, it only gives me a single embryo. It’s extremely expensive for a single dice. ”
Audrey and Guillaume have turned with great enthusiasm towards international adoption. It was two years since they were on the list to adopt in Thailand when they finally received the long-awaited call.
“In Thailand, the social system resembles that of Quebec. The children are well-fed and well stimulated. They are given in adoption because of extreme poverty. Culturally, it is the girls who care for aging parents, and it is the boys who end up at the orphanage. We will therefore adopt two boys aged 0 to 7 years. ”
By July, Audrey and Guillaume must pay $ 6,000 for the preparation of the file. In three years, when they have children, they will have to pay the remaining $ 54,000.
Audrey and Guillaume provided a detailed budget of all their expenses and savings that impressed Nathalie Chouinard, financial planner, at Service Signature Desjardins Bas-Saint-Laurent and Gaspésie-Îles-de-la-Madeleine.
“I want to congratulate them for the good management of their budget. They know where they are going. It shows a lot of foresight. They save $ 6900 a year and they contribute more to their pension fund at work. ”
For the first sum of $ 6,000 they have to pay, the planner believes it would be wise to use the $ 2,500 Guillaume’s TFSA and $ 3,500 Audrey’s TFSA.
Borrow on the value of the house
Nathalie Chouinard analyzed all the options for this project. Could the couple consider remortgating his house? If the value of the house was $ 400,000 with a mortgage of $ 253,000, it would have been possible to get money with this option. “In this case, it is impossible,” she says, “because there is not enough equity in their homes. ”
The solution: the loan adoption
The planner suggests using a $ 54,000 adoption loan offered in a few financial institutions. A product much more interesting than the personal loan, she argues. The current rate of a personal loan is 9% for a five-year term, while the adoption loan is calculated based on a mortgage rate that is currently 5.34% over five years and 4.34% for three years.
“It’s really a tool to facilitate adoption, explains Nathalie Chouinard. People are not choked with a refund too high because they can put it on for 15 years. But they also have the opportunity to pay faster if they want. ”
According to calculations by Nathalie Chouinard, the couple could take the rate over 3 years with a depreciation of 15 years. Refunds would be $ 408.70 per month.
The couple must consider the tax credits in their planning. The Québec government offers a refundable tax credit for adoption expenses. The maximum allowable is $ 20,000 per child for a maximum credit of $ 10,000 per child. This is 50% of the costs of translation of documents, travel and subsistence expenses, and fees charged by a recognized organization, etc.
The federal government proposes a non-refundable tax credit for the same type of expenses as the provincial one. The maximum amount is 15% of $ 15,905 for each child.
“The couple will be able to get a loan of $ 20,000 from the provincial government for the two children and about $ 4,700 from the federal government. I would take these amounts to repay their adoption loan more quickly. ”
After one year, the balance of their loan will be $ 51,380. Subtracting the tax credits will reduce the amount to $ 26,680.
“Instead of repaying the loan over 15 years, depreciation would fall to 6 years and a few months,” she says.
Refund even faster
When Nathalie Chouinard analyzes the budget of Audrey and Guillaume, she finds that they have the ability to save even with the monthly payment of $ 408.70 of the new loan.
The planner also notes that $ 400 is budgeted to pay for the university courses that will be completed in the spring of 2019. She suggests using this amount for future expenses related to children.
“Pending the arrival of children, in three years they will have accumulated $ 14,850 with a rate of 2%, she calculates. They could start investing in an RESP as soon as the children get their social insurance number. By contributing $ 2,500 per year per child, it gives $ 750 per child of government grants until the year of the children’s 17 years. ”
As for the $ 200 a month currently allocated to a debt payment that will be erased in 2022, they could be used to repay the adoption loan more quickly. Depreciation would be reduced from six years to four years.