For the simplest math let's just say the marginal tax rate is 50% so if you record a 10% gain in your taxable account (let's say you made $100k) you'll get taxes on half of it at your marginal tax rate so you will end up paying $25k in taxes and have a real gain of 7.5%.

This would mean investing has a highest return than your mortgage of 4.5% (a 3% diff) but you were choosing a riskier investment versus the sure thing of a 4.5% return on your mortgage.

Some more context on my choice to pay down - my portfolio is relatively high risk for someone that's near retirement (I hold around 15% cash/bonds and am heavy in tech) because of how much my stocks have grown (I've held Apple and Amazon for 10+ years) so my pay down of my mortgage is partly driven by this. I'm taking the sure thing of a 5.37% return on a portion of my portfolio in the face of a what I think will be a relatively flat year in the market and what was a huge year for me in 2024. I chose not to pay down much in 2023 or 2024 because I was bullish on the market.

The proper way to analyze this is to assume that your mortgage debt is tax deductible when you are comparing it to a non-registered portfolio. While it may take some up front work and perhaps realizing some capital gains to reorganize in this way, the point is that you should be able to use the Smith maneuver to result in your interest being deductible if you leave the mortgage in place to keep a non-registered portfolio in place.

Therefore, the math should really be (assuming you are in the top marginal tax rate):

Cost of debt = 4.5% with a 53.5% tax credit of that amount, net cost = 2.1%

It's also worth remembering than equity portfolio that returns 10% per year in the long run would typically do a few percent in dividends, and most of the rest in capital gains which is half the tax bill.

The net of this is that the after-tax result of having 4.5% debt and a 10% return on an equity portfolio is an average gain larger than 5.5% each year, not less.

-Mark

Yea I'm not paying debt, your house will keep appreciating in value, same with equities, also don't forget cad just lost like 5% in value since Trump got elected. Just in that + inflation which may go back up has already offset the interest. I don't want to be in a tied down position where I'm house rich or cash poor. You are tied what you can do without cash. And if you reheloc again we'll then you shouldn't have paid it off in the first place.

Your portfolio sounds like it's big enough that even if a 25% correction, it's not like you will go homeless and you can ride it out.

I'm pretty much just rebalancing especially as I'm sorta semi-retired now due to my health issues (I'm not sure I'll be returning to my line of high income work ever again). My mortgage was well over a million bucks not too long ago and carrying that while semi-retired doesn't feel fun even if I can carry it. I need to dial down my risk levels a bit as a result.

assume your mortgage is tax deductible? isn't that only possible for a rental/income property

Look up Smith maneuver

No. Deductibility of a loan is not based on what provides the security for the loan (your primary residence), it has everything to do with what the purpose of the loan proceeds are.

-Mark

got it thanks guys. reading about it now.


the key part is the type of mortgage, I don't believe i have the HELOC option on mine so i'll have to discuss with my broker.

i'm assuming you guys knew about the smith manuever before you got your mortgages?

Smith maneuver is all fun and games until 99 or 07 hit

Would have to $ROPE myself, if we took a -60%+ from leverage

You do not need a HELOC, but do need the ability to do a new mortgage. An ideal time to do this is at renewal.
All you need to do is nothing and it will sort itself out over time.

-Mark

You just gotta double down bro

so less than a month into a brand new mortgage isn't the ideal time lol....damn

My uncle lives in the Killarney area and wants to sell his place and get a place with more land, so he thinks Burnaby would be a good compromise. His assessment for his current place is around $2.7M, so he said he would be okay to go up to $5m if needed.

I only did a quick search but it's crazy that I didn't even see anything I liked when I set it up to $5M, which is crazy. I would have thought I could get my dream home for $5M... Nope. I told him it might be worth it to just buy some land and build.

I did find this place, but it's clearly meant for multiple families, it's kind of cool, but interior wise, it's not crazy or anything, I wouldn't mind seeing it in person. The thing that stands out the most is how ugly the back fascia of the house looks, there was no thought to the design at all, that would my biggest knock on this monster of a house.

https://www.redfin.ca/bc/burnaby/334...home/155249859

Budget of 5m and moving to Burnaby?

You can get large lots in Southlands etc.

The north shore is probably the best option at that price point for a larger lot, newer home at that price point. Paying 5 mill to live on the south slope in Burnaby feels legitimately retarded. And you’re not gonna get any larger lots north of Lougheed

its pretty damn nice inside. one thing that is a bit weird too even tho its a nitpick is the stupid pendant lights that drop down so close to the vanity on that double sink. dafuq. also all those fake plants just scream that this place was heavily staged.

Edit* that whole yard is concrete lol, kinda defeats the purpose of a larger lot, it’s all a driveway

The location isn't great, I know. It was just the only one I saw that was kind of cool within that price point. It's too far anyway.

His kids live in east van, so burnaby is closerish and with bigger lots. Southlands is a little bit further from his kids, so that is a consideration.

North van is nice, but he really doesn't like the bridge, especially since he'll have to get his grand kids from school a few times a week.

I think his best option right now is to just buy a tear down and just build something custom, but the headache of it all he's concerned about.

But, I think that is the only option since there isn't much on the market at that price point. It's crazy to think you can find a dream house for $5M in this market. A lot of buddy guy builds at this price point too.

I think the main question would be like, what’s a “bigger lot”

Is a double lot in Vancouver enough? Otherwise you’re really just moving east.

Outside of that small area you posted near Brentwood, OR like whatever that area is between Lougheed and the highway where Buble lives, the only other option really is that south slope

I find that south slope to be completely undesirable, it’s a good location but man to pay that much to live among all these other run down duplexes and shit feels crazy. There are a handful of larger lots in Capitol Hill/Barnet highway area but it seems like those go for a big premium as that’s far more desirable than the south slope.

I had visions of selling my home and buying a larger home in Burnaby heights with my parents where they could retire in the basement etc. but the prices there are insane for what you get. I’d rather buy a Vancouver special and go through another extensive Reno

There's pockets of South Slope that are nicer, and I get the appeal as it's close to Killarney.

If Burnaby I prefer the Moscrop area or Capitol Hill. Caribou and Buckingham is pretty nice as well but all those except for Moscrop is pretty far.

Moscrop area (Garden Village) is where I am and my biased opinion is that it's the most convenient area in Burnaby.

But if he wants a large lot he'll need to look at either Buckingham Heights or the Government Road area.

There's no such thing as large lot, unless you look around government road area or Buckingham heights.

If you want like 10000sq+ you gotta look south Surrey or Langley.

I was interested in that house too, but it backs onto lougheed highway + skytrain tracks so it's probably gonna be loud as fuck

It's a new build; of course it would be staged.

My sister is good friends with the developer who built that house. They just dropped the price $300K. Tough market out there.

I mean what's your definition of large? 7-8000sqft imo is pretty large and I don't really have any interest in going bigger. So much lawn to take care of.

Yes I'm Chinese :badpokerface: