Quote:
Originally posted by SlySi
So help me understand in lamers terms....
You are using mortgage to gamble on investments?
|
Sort of. You are converting your non-tax deductible mortgage into a tax-deductible line of credit.
EDIT:
An example:
- House worth 400k
- You own 200k worth of equity, and owe 200k on the house
- You have 200k in investments, outside of your RRSP.
The goal is to change this to:
- House worth 400k
- You own the house, no mortgage
- You have a line of credit for 200k
- You have 200k in investments, outside of the RRSP
The total amount of money is the same, right?
But the advantage is that the interest paid on the LOC is tax-deductible, whereas the interest on the mortgage is not.
In an ideal situation, after 25 years or so, your house will have appreciated, and your investments will as well.