Pursuing My Dream – Remortgaging My House

Nothing can stop me now, ‘cause I don’t care anymore – NIN

Last week, I initiated another big step for my RV project: I’m remortgaging my house! Most people would advise against that, but I’m doing it anyway; digging a deeper financial hole to live my dream. Why am I doing this? There are several reasons why I’m doing it. But first, let me introduce my plan to you:

 

Remortgaging my house – pursuing my dream

At first, my plan was to sell my house, become debt free and go with my family for a one year trip in an RV. I would have had roughly 30-40K in cash and absolutely no debt. Being debt free at 34 was the most appealing financial situation I could dream of.

Unfortunately, after two potential buyers, I was left without a sale. It got me thinking about what will happen when I come back and it appeared that the best solution was to keep my house. By remortgaging my house, I will show the following net worth statement:

As you can see, it will not be the ideal world since I will still owe $345K. My traveling budget has just increased to roughly $5,750/month considering I will continue to maintain my house. I expect to rent my house for roughly $1,500/month. If it’s the case, my traveling budget will become $4,250/month.

I had a home equity line of credit of 265K but had to reduce it to 234K in order to get a mortgage and finance a total of 80% of my property value. The extra 23K served to pay for all the upgrades on the house and RV. With this new financing structure, I’m able to leave and won’t pay much interest while I owe lots of money. There is a price to pay to pursue your dream ;-).

 

Because my income generation capacity is greater than my frugal abilities

By definition, there is a limit of how much you can cut from your budget. Technically, you can be the “most frugal” of the frugals, and you can’t go below a $0 budget. And even then, this is also impossible. However, if you focus on your income generation capacity, the sky is the limit. The first reason why I decided to remortgage my house is because I know I can increase my income if I work harder. There are virtually no limits to how much I can make, but there is a limit to how much I can cut. Therefore, I would rather focus on income generation. My websites are constantly growing and I can now count on a solid base of income. Over the past few months, I could easily withdraw $1,800 from my company without putting the company at risk. I’m slowly but surely getting close to my goal of withdrawing $3,000 per month.

Wait… if I rent the house at $1,500/month and I withdraw $3,000/month from my company, this only makes $4,500 and I expect to spend nearly $5,750 – how does this makes sense? The first answer is that We are getting family allowance allocations (roughly $700/month), I have a small reserve on my line of credit ($7,000), another reserve in my business ($15,000) and a few thousand in my bank account. This is enough to cover everything. And as I’ve mentioned before, I have a juicy 60K sitting in my RRSP account that I won’t hesitate to withdraw if I need too.

Finally, I truly hope that working full time on my online company will lead me to generate over $3,000 in extra income. This is my main goal and I am starting to see how it will happen. At the beginning of 2015, I was barely able to withdraw $500 from the company and I’m now up to $1,800. This is an increase of 360%. I don’t expect to follow the same curve, but I think it’s fair to assume that in a year from now, I will be around $4,000 in extra income… and maybe more!

 

Because you only live once, and now

I know my plan seems a little bit crazy; it’s filled with lots of “ifs” as I don’t know if I will rent my house or if I will be able to increase my online income. However, the plan B of withdrawing all my cash to finance this project is real. I am doing this because you only live once, and it is happening today.

I’m now taking another step to live an extraordinary experience. I feel blessed to be able to do it. I feel blessed that we are all healthy and willing to take this leap of faith in life. So far, I don’t regret any moves I’ve made, but I do regret moves I didn’t make. I’m not going to regret about this.

 

Because the situation won’t be that bad when I come back

It took me 10 years to build a $204K net worth. It’s not that impressive, but I’m proud of what I’ve achieved considering I have 3 children and that I’ve lived a great life so far. Once back, it will take me less than 10 years to achieve this level again. In fact, the worst case scenario only increases my total debt by another 7K (what is remaining on my line of credit) and the complete withdrawal of my 60K in RRSP. My net worth would drop to $137K and I would probably need only 5 years to get it back over 200K. At that time, I’ll be 41… there is truly nothing to worry about! Hahaha!

So if my worst case scenario leads me to be at the same situation I am today, but at the age of 41, I really don’t see any problem with leaving.

I wrote this article to show you how it is possible to quit everything and live your dream even if you have multiple strings pulling you back such as a good job, a house and debts. Everything is possible if you truly want to make it happen!

 

Enjoy life now!

Mike

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