Vacation debt is one of those things that feels harmless while you are away, but it can quietly hurt your finances long after you are back in Edmonton. As a mortgage broker, I see vacation debt show up on credit reports all the time and it often surprises people how much it slows down their bigger goals. A great trip is worth planning for, but it is a lot less fun when you are still paying for it months or years later.

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The challenge is that vacation debt almost always costs more than people expect. Even if you think you are being frugal, prices add up quickly, especially if you are travelling with kids, meeting friends, or doing once in a lifetime experiences. By the time the trip is over, vacation debt can easily be thousands of dollars at high interest rates.

How Vacation Debt Follows You Home

The problem with vacation debt is not the trip itself, it is the interest that starts piling up once you are home. If you are carrying a balance at typical credit card rates, most of your monthly payment goes to interest, not to actually reducing the vacation debt.

That is when the stress starts. Instead of remembering the vacation fondly, you are staring at a credit card statement every month and wondering why the balance is barely moving. I see people in Edmonton who went on a one week trip and end up paying for it for a year or more. That is a lot of money that could have gone toward savings, an emergency fund, or extra payments on a mortgage.

Why Vacation Debt Matters When You Have A Mortgage Goal

Vacation debt matters even more if you want to buy a home or refinance in the next little while. Lenders look at your total debt payments when they decide how big a mortgage you can qualify for. If you have a few thousand dollars of vacation debt sitting on a credit card, that can reduce your borrowing power.

For first time homebuyers in Edmonton, vacation debt can be the difference between qualifying for the home you want or being told you need to wait. For existing homeowners, vacation debt can slow down plans to renew, refinance, or tap into equity for renovations or investments. It is frustrating to be in a good position on your mortgage but held back by old credit card balances from a trip that is long over.

Smarter Ways To Avoid Vacation Debt

Vacations should be planned the same way we plan for a down payment or a mortgage renewal. Here are a few simple ways to keep vacation debt under control.

First, set a realistic budget for the trip and start saving ahead of time. Even putting money aside every paycheque into a separate account can go a long way toward avoiding vacation debt.

Second, try to pay for as much as possible with cash you already have. You might still use a credit card for points and protection, but the idea is to have the money sitting in your account ready to pay the bill in full when you get home.

Third, if the only way the trip works is to put it all on credit, consider scaling back the vacation plans. A smaller vacation without vacation debt is usually better for your mental health and your financial plan than a big trip that hangs over you for months.

Vacation Debt, Interest Rates, And Your Bigger Plan

Right now, Canadians are dealing with higher interest rates and a higher cost of living. That makes debt even more painful because the carrying costs compete directly with your mortgage payments, utilities, groceries and everything else.

If you are already carrying debt from a previous trip, it can sometimes make sense to look at ways to clean things up, especially if you are a homeowner in Edmonton with some equity. In some cases, a well planned refinance can help you roll high interest vacation debt into a lower rate mortgage and free up cash flow. In other cases, it is better to attack the debt directly.

Need Help With Vacation Debt?

If you’re worried about debt, or you want to make sure your next trip does not interfere with your mortgage plans, I am happy to walk through your numbers with you. We can look at your credit cards, your current mortgage and your goals, then put together a plan that lets you enjoy time away without hurting your long term finances.

Whether you are preparing to buy your first home or your fifth, if you’re looking to get pre-approved for a mortgage in Edmonton, fill out my online application. I’m here to help you every step of the way.

About Jason Scott, Edmonton Mortgage Broker

Looking for a personalized mortgage solution? As an Edmonton Mortgage Associate, I’m trusted partner who will help you get the right mortgage for your home or investment property. I’m Jason Scott, and I’ll be your Mortgage Broker in Edmonton.