Becoming a Successful Entrepreneur

Friday, March 31, 2006

Borrowing to Invest

Here is a great Tax Hint for people that own a house:

Option 1 (Asset Swap): If you currently have a mortgage and have money in an RRSP, then you're in luck. An asset swap works by liquidating your investments and using this money to pay off your home. Then you want to get a 2nd mortgage and invest this money back into your RRSPs. You are back to square one, however, now you have borrowed money to invest and the interest on the loan will be tax-deductible.

Option 2: Scenario taken from
In Canada, banks will typically lend you 75 per cent of the value of your home. If you own a home worth $100,000, the bank may lend you $75,000 to invest in something else. If you have a mortgage outstanding, it’s 75 per cent less whatever you owe. For example, if you still owe $75,000 on the mortgage, then you’re at break even. However, if you only owe $74,000, there’s $1,000 sitting in your home you could borrow to invest.