Also appeared in:

	Vancouver Sun Saturday, September 11, 2004
	Edmonton Journal Monday, September 13, 2004
	Saskatoon StarPhoenix Monday, September 13, 2004

Has the value of your home gone up? Unfortunately, unless you plan to sell and downsize, it probably won't benefit you much.

While it can be frustrating to see property values and related costs such as taxes rise with no immediate lifestyle enhancement, it's usually best to resist the temptation to convert some of that real-estate appreciation into cash through home-equity loans or a higher mortgage, according to Emily Reid of Montreal-based Reid and Associates Personal Financial Counselling.

Reid said mortgage bump-ups too often are a way of avoiding the hard decisions about current lifestyle spending.

"Increasing the mortgage by $50,000 or $100,000 can be an excuse for not controlling spending, which is usually the root of the problem," she said.

"A house is part of your future financial security, not current lifestyle. If you've been racking up debt, a one-time extraction of equity does not solve the problem any more than using a line of credit to pay your credit cards solves the problem. Current lifestyle has to fit into current income. There's no way around it.

"People justify it by saying, 'Well, the house is worth $200,000 more, I'm way ahead,' but all they're really doing is lengthening the amount of time they'll be paying the mortgage and the overall price of the house. They're going backward, not forward."

Reducing the mortgage, both term and amount, is what you should be shooting for, not the opposite, she said. Given the structure of the Canadian tax system, paying down a mortgage is more beneficial for most citizens than contributing to an RRSP, she said. "The house is a tax-free investment. An RRSP is fully taxable."

Financial adviser Adrian Mastracci of KCM Wealth Management Inc. of Vancouver notes that while some debt is tax-deductible, mortgage debt on a principal residence is not, so adding more is of little benefit.

"If you can stay away from non-deductible debt, it'd be preferable. I know not everybody has that choice. But I also see a lot of people who've gone overboard on [tapping into equity]. With the extra debt they've packed on, they're going to feel it in the pocketbook if interest rates go up three or four per cent."

Reid said if a household is having trouble making ends meet, a cash injection from home equity will provide only a temporary solution.

What's required is a thorough assessment of where the money that comes in each month is spent, and establishment of a list of priorities.

"Typically, households can only account for 60 to 70 per cent of what comes in. With single men, it's sometimes as little as 40 per cent," Reid noted.

If there's not enough income to cover everything, Reid said the choices are clear: earn more or spend less.

"Maybe you don't need a phone in every room, or restaurant pizza, or $15 a month in bank charges, or a car that takes up 17 per cent of disposable income. There are alternatives," she said. "Often, people are just paying for convenience -- convenience they can't afford."

NOTE: The information provided above is intended for general informational purposes only. It does not constitute advice for anyone's specific situation. Everyone should always first consult directly with their advisors to determine the appropriateness of any information contained above before taking any action. KCM Wealth Management Inc. assumes no responsibility for any loss or damage arising from the use of, or reliance upon the above information.