Some Canadians: want to make your mortgage interest deductible?
Suppose you have a $300,000. house, $100,000. mortgage the proceeds of which you used to pay for your owner-occupied home. While our U.S. friends can deduct their mortgage interest, we can't ... but we do get the capital gain free of tax, when we sell it.
Suppose you have $150,000. worth of non-RRSP investments.
Suppose you sell $100,000. value of investments, then use the money to pay off the mortgage (supposing that your contract permits it).
Then, make a new mortgage for $100,000. and use the proceeds to buy back the stocks that you just sold, or whatever other ones you choose, but not ones to put into an RRSP (and maybe not ones to put into the new Tax-Free Savings Accounts, either).
When you borrow to invest in non-RRSP assets ... the interest is deductible.
Last mortgage ... you used the money to pay for a house ... interest not deductible.
This mortgage ... you used the money to buy stocks (or, if you don't know how to manage the stocks yourself, to pay 2.5% or more per year to a mutual fund manager to run your mutual funds ... and he gets his, whether he makes anything for you or not) ... making the interest deductible.
There are costs associated with the selling and re-buying of the stocks, and for having the certificates of ownership registered and issued, if you want to use them as collateral to back the loan.
But don't borrow more than a quarter to a third of the value of the asset that suports the loan. Banks will usually lend up to 50% ... but if the stock prices drop, say 40%, as many did recently ... if you're near your limit, you have big-time trouble ... right here in River City!
Let's say you had $100. worth of stocks, the bank was willing to lend up to $50., maybe $60., so you borrowed $40.
Stock prices go down 40% ... the $100. value is now worth $60. ... so the bank will be willing to lend $30.00 ... and if you have to put up more asset or cash, they'll want some extra.
They want either about $25. - 30. more value in fresh stock certificates ... or they want a minimum of $10.00 cash to pay down your loan ... and they'll more likely ask for $12. - 15., to give some cushion.
And they want it today ... tomorrow at the latest.
Don't tie yourself into that kind of a box!!
As I've said before ... learning how money works ... an interesting hobby ... that pays well.
P.S. Boss your Dollars ... or they'll boss you!