Honestly, committing to another 10 years of working (at age 50-55) to earn an extra $2k/yr(maybe more/maybe less as 5% is NOT guaranteed) not my cup of tea. But I do love the concept and the idea that this forces you to save, had I been 45-50 years old and mortgage free - this would have been something for me. Thank you once again for all the efforts you put into your videos and for sharing your knowledge.
Having a RRSP after 65 makes the government rich. Any income from an RRSP after 65 just cuts back entitlements from GIS. At 71 your RRSP gets taxed for most at the highest tax rate. Retire at 60 and use your RRSP as income plus contribute to your TFSA. Use up as much of your RRSP before 71. Delay CPP / OAS until 70.
Have done something similar, although it differs in a way: had no debts and had maxed out the RRSP room, so took out a mortgage of $100K to invest outside of RRSP/TFSA - in an open investment. So now making the mortgage payments and will look to deduct the mortgage interest on the income taxes. When it comes time to fully retire in 4-5 years, the open investments gain will be taxed as a capital gain at the current capital gains rate (50%). Should end up being a decent strategy given that RRSP/TFSA are already maxed.
For years I have been telling people that having a mortgage of some type is a good thing and they think I'm nuts. The goal is to learn to manage all forms of debt and not just the elimination. Debt to build assets is smart. Can't wait for the HELOC video.
@@canpin I would get that looked. You should be able to find something much lower for a HELOC. If your bank won't do it try an independent mortgage broker.
Just a quick question, what about the interest you are paying on the remortgaging your home $ 225,000.00 for the 10 years - as well sometimes you lose monies in your investment you could lose a bit of the original RRSP contributions sometimes it could be up to 20%
The idea behind is having in the beginning of the investissement a huge amount of money from our new mortgage and put it to work during ten next years, rather than contributing small amounts each month. the question is the interests that will be paid are also huge.
Thanks for the info. I didn't hear anything about the cost of the mortgage? typically on a HLOC it's interest only. But there is going to be a 10 year cost of the interest. At current rates (I have an HLOC) that could be $15k-25k a year in interest. Did I miss that being covered?
What about cost of borrowing? Shouldn't we consider the interest costs for that ten year mortgage and compare to the upside of front loading the investments?? I am curious as to why this isn't part of the plan?? thoughts?
There is one factor you didn't mention is the monies you are loosing on the interest you are paying on the mortgage. If the mortgage rates go up to 3 or 4% then in the end you have only gained 1 or 2 % on your money if you average 5% on RRSP.
You can invest your TFSA in the market and allow it to grow. The banks have sold it as a interest account - which is not where the TFSA should be used.
If you are maxed on RRSP and TFSA, utilizing your home equity is likely not necessary - you should have enough cash flow from investments in retirement.
@@ParallelWealth perhaps using the Smith manoeuvre on a second mortgage/HELOC..... Would love to see a video on you thoughts on using a readvanceable mortgage to invest with
You are going to have to create a video for the 25-and-under of today who will NEVER be able to buy a house based on current real estate prices vs real wages, but may inherit in their future. How any young person is supposed to be able to ever move out and start their own adult life today is beyond me.
The contribution lifetime limit on TFSA’s in Ontario is like 63k! What about the interest you’ve paid on that mortgage for 10 years vs putting the money directly to RSP? Also, what’s the advantage of paying say 4% interest on your mortgage and only getting like 2 or 3% on investment?
Exactly, what I am also thinking. Having a mortgage is sort of like 50:50 allocation in terms of your monthly amortization with say $2K, half goes to the interest and half to principal. You are like loosing half of it to pay for the interest of your loan.
@CDH you should find it easy to identify stocks that pay a dividend above the mortgage interest rate for your TFSA. All five of the big banks, the Telcos, Enbridge, and Manulife are just a few that can deliver a reasonable return on the dividend alone inside your TFSA.
I am retire now, If I have no more contribution rooms in both TFSA and RRSP, is it worthwhile to have a mortgage on my house so I can use the money invest in the stock market now? Please advise.
Excellent information! If I use the dividend generated from the loan portfolio (none-registered) to contribute to TFSA, can I still deduct the loan interests?
With the new mortgage now after re financing . How are the retirees paying that down? Is the new mortgage pay down coming from the TFSA and RRSP? What about other vehicles for investments if I am a 37 yr old. What are those recommendations ?
I think he's assuming you will work until 65. Your expenses wouldn't change but you could front load your investments. What he doesn't consider/discuss is the interest on the mortgage over that 10-year period which at 2% (and I'm being conservative) is $26K. So, for a total gain of $4K vice the $30K he talks about, not worth it I think?
This is a good idea if you have the RRSP room. If you kept up your RRSP contribution every year you cant do it.. wish I knew this years ago Over all the videos have been great
You can still do this strategy with a non-registered account and you can deduct the interest from your taxes as well. It's also sometimes called the smith maneuver if used with an existing mortgage.
Thank you Adam. I owned my home rather late in my life, and just retired at 71, but still have 2-3 years to pay off of my mortgage. Most of my retirement savings are in RRSP. I also have HELOC debt that helped me cover many of the renovation and other expenses. I wonder if I should use additional HELOC funds to invest in TFSA and write off the interest costs of the portion borrowed for investment at tax time....is this a strategy that can help generate cash flow in my TFSA as I can no longer use RRSP as a vehicle?
Unfortunately TFSA contributions aren’t deductible for tax purposes, additionally the interest on loans used to invest in a TFSA are not subject tax deductions. Your strategy would only work in a non-registered account. Speak with your financial advisor for more info!
i own a home, but it's only worth 125,000, (sigh) maybe slightly more. i am 59 and started to draw pension at 57. pension + small CPP survivor payment totals about 2000 net per/month. is it realistic to think i can use my home equity in same method as the million dollar homeowner? and should i??
Yes, but you are going to have to be very careful and have a very clear plan. Work with your mortgage broker or financial planner to hash out a plan. You don't want to leave yourself without a home!
What about the interest cost of paying the mortgage I was expecting you to mention that Its very misleading I understand the concept but see no real impact Unless you can do a part 2 highlighting tax benefits of borrowing for investing Ti determine the real savings
What interest rate did you use for the mortgage? I think you used about 2% - but that rate is not guaranteed for 10 years. 5 years from now it will be much higher, likely closer to 5%. I saw a prediction that inflation will be over 5% for 2022, and then 6% for 2023 and 2024 - and interest rates will follow inflation. And how are you finding a risk free investment that will pay you 5%? I think it's obvious that you will be ahead if you can borrow money for 2% and then invest it to give you 5%. But I don't know of any risk free investment now that will pay you 5%.
Ron, I ran 5 year mortgage rate plus 3% for the investment. This has been the 30 year moving average. As rates increase, so will your expected return at the same risk level. And the 5% isn't guaranteed, just like the value of a property isn't. It's as accurate a comparison without knowing the future - again, all based on historical. Not everyone will agree with it, but works well for those that need the extra bump.
This is valid concept. However, in order to achieve 5% annual return you have to invest in the stock market. If you invest lump sum in the stock market at all time high, you may end up with half of your money in 10 years. It would have been fantastic idea on March 23rd.2020. Today I am not so sure. Warren Buffet said :'never invest with borrowed money '. Unless there is a way to get guaranteed 5% annual return on investment. Please let us know if there is such thing.
Robert, valid point - and although 5% guaranteed is not an option on the market, I do think that a well diversified dividend stock portfolio of blue chip stocks could likely fit the mold. I leave the portfolio management to a few firms we partner with, but historically they have been able to provide this and more over a 5 year average even through 2008, 2011, 2015 and 2020.
@@ParallelWealth I know and I agree. I have been in stocks for about 30 years. Actually retired and living off dividends. CPP and OAS just addition to my main dividend income. However, I went through ups and some serious downs and disappointments. Who would predict that sure shots like Polaroid and Kodak would end up delisted? So all I am saying is :'past performance does not guarantee future results'. The fact that dividends became very popular and too many people think that stocks can go only up makes me uncomfortable. There were stretches in time when markets didn't go up for 17 years. Investing is the way to financial independence. But it is always good to know that it is not without risk.
The concept is to make the spread for 10 years between the cost of mortgage to investing. After 10 years (or whenever) you would pay off the mortgage and collapse the investment - leaving you with the growth and more money for retirement than you had otherwise. We have done this first hand for clients and it works great.
Well you can't deduct the interest. So you grow the money tax free, but can't deduct the cost to borrow. Plus max limits with TFSA. So you could look at both sides. Typically when you borrow to invest it will be larger than your TFSA contribution limit.
If you invest the money outside of a TFSA or RRSP the interest is tax deductible. Interest payable on money borrowed to invest in a TFSA or an RRSP is not tax deductible.
You didn't include the closing costs for the new mortgage, and you didn't mention what the retiree is supposed to do if they're forced to retire early, then suddenly they have no income and a $2000 a month mortgage payment they need to make by withdrawing their retirement funds, putting them at a loss compared to the conservative scenario you're using as a comparison.
Good video with some helpful advice. I appreciate the focus on using RRSP/TFSA's but for those (lucky few...?) that have little room remaining in either, how about a version of this video, where you cover the use of a non-registered account? Obviously, having investments in Tax Sheltered or Tax Deferred accounts is more desirable, but there are some tax advantages of investing proceeds from a home equity loan into a Non-Registered account. For example, if individual used loan to purchase good dividend paying stocks/ETF's, some (if not all) of the loan interest would be tax deductible. In fact, many of the Canadian Banks and Telco's have dividend payments that are much higher than current HELOC interest rates. Enabling you to not only pay of the loan interest, but also pay off the principle (while being able to write-off some of the interest against the income). If that video was already done, my apologies...I couldn't find it.
Jax we have done a few on this - even look at last video on the Smith Manoeuvre - covers this off fairly closely to what you want. Also have covered it by buying a larger home to grow tax free...
@@ParallelWealth Fair response. I'm familiar with the Smith Manoeuvre (in fact, I have read Mr. Smith's book :-). I guess I was just suggesting it was worth mentioning that non-reg accounts could also be used, affectively in some cases (in the original video). But I should've phrased my response accordingly. I'll check out the videos you mentioned. Thanks again for the great content.
Wouldn’t it make just as much sense to make as small as possible mortgage payments and invest the rest or even remortgage at an earlier age. The drastic increases in property valves is making it more interesting to see how I can enjoy that equity while still living in it.
Unfortunately I took on a new mortgage 4 years ago at 44 yrs old. I'm still a long ways away from getting this bad boy paid off. What are your thoughts on one of those reverse mortgages once you hit retirement age?
Sean, using equity from your home in retirement is a decent option, but be careful how you structure it. The whole reverse mortgage set up can create a bad situation really fast - I have seen it first hand with one of my client's mom. When the time comes do your research and make sure that you aren't paying interest on interest...I know it sounds crazy but that's the way some of the big reverse mortgage shops set things up.
@@ParallelWealth I looked through your videos and didn’t see one for reverse mortgage strategies. If you don’t have one would you consider doing one. I’m 55 doing some catch-up retirement saving and I’m looking at all possible scenarios for retirement. Thanks, I like your content!!
Looking at your videos and the numbers you use, you seem to believe that making over 100k a year and having a million dollar house is typical. I have never met anyone in this situation, which tells me retirement will be quite difffent for me.
Fair enough. I live in the Greater Vancouver area so thats the norm unfortunately. I also use 100k often for simple math! Even a financial planner likes to keep it simple math sometimes.
Are there situations where this strategy makes sense if you are out of RRSP & TFSA room? We have been slow paying our mortgage for a few years, and adding to our investments. But I'm wondering if we should take out more mortgage at renewal to invest in our non-registered accounts. Thanks for the great videos!
If you understand the risk associated with doing this then yes. It's not for everyone, but with current rates there can be a good spread between mortgage and investment.
That's the strategy if you don't have the RRSP room. Looking at TFSA, if fairly even between that and non reg and allow for tax deductibility. If both RRSP and TFSA are maxed then no doubt use non reg and deduct the interest.
I wish my mind was wired like yours!! Brilliant thinking...lost me at taking another mortgage out but you explained it well. I wish your office was located in Niagara Falls area cause I’d hire you!! Love all your videos
What if someone is already on track with a substantial amount of money in both TFSA and RRSP.. do they still need strategy? I believe this will add a lil bit of more stress since i will be under debt for another 10 years just to make 2k/year. Also i really like your videos and looking for a financial planner , though im just 27 atm but i feel its better to start soon or you just take clients who are close to retirement?
I like this plan but there are definitely risks. One of them is the timing of such a large investment (i.e. money going in close to market corrections). That said, if you're only shooting for 5% return then you're likely in extremely low risk investments. Personally I'd fire any investment advisor who only got me 5% average per year. 8-10% should almost be a no brainer.
Outstanding information and well-explained! We are in the process of doing this to take advantage of a scorching hot real estate market here in eastern ON.
Not much data behind this happening...most economists and mortgage professionals see slow and steady increases. A quick jump would cripple the housing market - govt won't let that happen regardless.
Honestly, committing to another 10 years of working (at age 50-55) to earn an extra $2k/yr(maybe more/maybe less as 5% is NOT guaranteed) not my cup of tea. But I do love the concept and the idea that this forces you to save, had I been 45-50 years old and mortgage free - this would have been something for me. Thank you once again for all the efforts you put into your videos and for sharing your knowledge.
It's a great strategy for those that need to 'catch up. Sounds like you are already on track.
Having a RRSP after 65 makes the government rich. Any income from an RRSP after 65 just cuts back entitlements from GIS. At 71 your RRSP gets taxed for most at the highest tax rate. Retire at 60 and use your RRSP as income plus contribute to your TFSA. Use up as much of your RRSP before 71. Delay CPP / OAS until 70.
Interesting Robert - just curious - are you a financial advisor or tax specialist?
Robert, can you elaborate on the max tax at 71? That is not making sense to me.
@@brobins2207 I was thinking the same thing.
Love your channel... and love how you share information like this.
Thanks Martin
I have suggested this strategy to others, and they had the same reaction to "taking out a mortgage".
It's not for everyone, but it is a great strategy.
We've used this strategy to maximize my husband's RRSP as he does not have an employee plan with a match.
Have done something similar, although it differs in a way: had no debts and had maxed out the RRSP room, so took out a mortgage of $100K to invest outside of RRSP/TFSA - in an open investment. So now making the mortgage payments and will look to deduct the mortgage interest on the income taxes. When it comes time to fully retire in 4-5 years, the open investments gain will be taxed as a capital gain at the current capital gains rate (50%). Should end up being a decent strategy given that RRSP/TFSA are already maxed.
Did exactly the same thing. Same amount etc. It is significant when the mortgage rates are so low.
For years I have been telling people that having a mortgage of some type is a good thing and they think I'm nuts. The goal is to learn to manage all forms of debt and not just the elimination. Debt to build assets is smart. Can't wait for the HELOC video.
The faster people get this concept, the faster they can compound their wealth! Thanks for watching.
I have heloc havent use it, interest is at above 6% 😒
@@canpin I would get that looked. You should be able to find something much lower for a HELOC. If your bank won't do it try an independent mortgage broker.
Just a quick question, what about the interest you are paying on the remortgaging your home $ 225,000.00 for the 10 years - as well sometimes you lose monies in your investment you could lose a bit of the original RRSP contributions sometimes it could be up to 20%
The idea behind is having in the beginning of the investissement a huge amount of money from our new mortgage and put it to work during ten next years, rather than contributing small amounts each month. the question is the interests that will be paid are also huge.
Looking back to two years ago, this would have been a great idea with extremely low interest rates. Does it still work now?
Not a good time right now
Thanks for the info. I didn't hear anything about the cost of the mortgage? typically on a HLOC it's interest only. But there is going to be a 10 year cost of the interest. At current rates (I have an HLOC) that could be $15k-25k a year in interest. Did I miss that being covered?
What about cost of borrowing? Shouldn't we consider the interest costs for that ten year mortgage and compare to the upside of front loading the investments?? I am curious as to why this isn't part of the plan?? thoughts?
How about the compound interests on your second mortgage for 10 years???
I’m just gonna look for an extended amortization period. 30 or 35 years if I can get it. Keeps my payments low so I can invest more through the years.
Its a strategy but be mindful about paying more interest on a 30-35 years mortgage versus a 20-25 years mortgage.
There is one factor you didn't mention is the monies you are loosing on the interest you are paying on the mortgage. If the mortgage rates go up to 3 or 4% then in the end you have only gained 1 or 2 % on your money if you average 5% on RRSP.
The spread needs to be there to continue this process - when the spread narrows you wrap it in.
And here we are with higher rates and lower returns...
What’s the point to borrow the money and put into TFSA, the interest is very low .
You can invest your TFSA in the market and allow it to grow. The banks have sold it as a interest account - which is not where the TFSA should be used.
What about if you max out TFSA, RRSP and paid off the mortgage.
If you are maxed on RRSP and TFSA, utilizing your home equity is likely not necessary - you should have enough cash flow from investments in retirement.
@@ParallelWealth perhaps using the Smith manoeuvre on a second mortgage/HELOC..... Would love to see a video on you thoughts on using a readvanceable mortgage to invest with
What happens to the balance on the re-mortgaged in 10 yrs? How is that paid off?
You are going to have to create a video for the 25-and-under of today who will NEVER be able to buy a house based on current real estate prices vs real wages, but may inherit in their future. How any young person is supposed to be able to ever move out and start their own adult life today is beyond me.
I have 4 young kids - my wife and I are already planning how to help get them established in a home...it's a real concern.
Great topic! Really liked learning about this option that is applicable to many in hot canadian real estate markets.
Glad you enjoyed it!
Does the second scenario take into account the interest paid on the mortgage?
Yes.
What is the investment within the TFSA?
It could be many different things - speak to your investment professional for more on this!
The contribution lifetime limit on TFSA’s in Ontario is like 63k! What about the interest you’ve paid on that mortgage for 10 years vs putting the money directly to RSP? Also, what’s the advantage of paying say 4% interest on your mortgage and only getting like 2 or 3% on investment?
That was exactly my question.
Exactly, what I am also thinking. Having a mortgage is sort of like 50:50 allocation in terms of your monthly amortization with say $2K, half goes to the interest and half to principal. You are like loosing half of it to pay for the interest of your loan.
@CDH you should find it easy to identify stocks that pay a dividend above the mortgage interest rate for your TFSA. All five of the big banks, the Telcos, Enbridge, and Manulife are just a few that can deliver a reasonable return on the dividend alone inside your TFSA.
Love your videos. Do you do zoom calls for consultation?
Do you have a link to the future video referenced at 1:20?
Still on the list to create!
Any update to your links?
Updated
I am retire now, If I have no more contribution rooms in both TFSA and RRSP, is it worthwhile to have a mortgage on my house so I can use the money invest in the stock market now? Please advise.
The spread in interest rates can still create a benefit. Comes down to need and willingness for risk.
Excellent information! If I use the dividend generated from the loan portfolio (none-registered) to contribute to TFSA, can I still deduct the loan interests?
Yes
This topic's so handy! And sorry for being a newbie - When you say get Mortgage, do you mean HELOC?
Glad to found your channel! :)
Could be either depending on the situation - rates, term, lender etc. We have seen it structured both ways for various reasons.
With the new mortgage now after re financing . How are the retirees paying that down? Is the new mortgage pay down coming from the TFSA and RRSP? What about other vehicles for investments if I am a 37 yr old. What are those recommendations ?
I think he's assuming you will work until 65. Your expenses wouldn't change but you could front load your investments. What he doesn't consider/discuss is the interest on the mortgage over that 10-year period which at 2% (and I'm being conservative) is $26K. So, for a total gain of $4K vice the $30K he talks about, not worth it I think?
I hit the like button but i need this in an American version for retirement
This is a good idea if you have the RRSP room. If you kept up your RRSP contribution every year you cant do it.. wish I knew this years ago
Over all the videos have been great
Thanks Scott!
You can still do this strategy with a non-registered account and you can deduct the interest from your taxes as well. It's also sometimes called the smith maneuver if used with an existing mortgage.
Have you presented how "Reduction of Income Tax at Source" works? I have done this, and it is just awesome for those who do regular investing.
Thank you Adam. I owned my home rather late in my life, and just retired at 71, but still have 2-3 years to pay off of my mortgage. Most of my retirement savings are in RRSP. I also have HELOC debt that helped me cover many of the renovation and other expenses. I wonder if I should use additional HELOC funds to invest in TFSA and write off the interest costs of the portion borrowed for investment at tax time....is this a strategy that can help generate cash flow in my TFSA as I can no longer use RRSP as a vehicle?
Unfortunately TFSA contributions aren’t deductible for tax purposes, additionally the interest on loans used to invest in a TFSA are not subject tax deductions. Your strategy would only work in a non-registered account. Speak with your financial advisor for more info!
i own a home, but it's only worth 125,000, (sigh) maybe slightly more. i am 59 and started to draw pension at 57. pension + small CPP survivor payment totals about 2000 net per/month. is it realistic to think i can use my home equity in same method as the million dollar homeowner? and should i??
Yes, but you are going to have to be very careful and have a very clear plan. Work with your mortgage broker or financial planner to hash out a plan. You don't want to leave yourself without a home!
What about the interest cost of paying the mortgage
I was expecting you to mention that
Its very misleading
I understand the concept but see no real impact
Unless you can do a part 2 highlighting tax benefits of borrowing for investing
Ti determine the real savings
What interest rate did you use for the mortgage? I think you used about 2% - but that rate is not guaranteed for 10 years. 5 years from now it will be much higher, likely closer to 5%. I saw a prediction that inflation will be over 5% for 2022, and then 6% for 2023 and 2024 - and interest rates will follow inflation. And how are you finding a risk free investment that will pay you 5%? I think it's obvious that you will be ahead if you can borrow money for 2% and then invest it to give you 5%. But I don't know of any risk free investment now that will pay you 5%.
Ron, I ran 5 year mortgage rate plus 3% for the investment. This has been the 30 year moving average. As rates increase, so will your expected return at the same risk level. And the 5% isn't guaranteed, just like the value of a property isn't. It's as accurate a comparison without knowing the future - again, all based on historical. Not everyone will agree with it, but works well for those that need the extra bump.
This is valid concept. However, in order to achieve 5% annual return you have to invest in the stock market. If you invest lump sum in the stock market at all time high, you may end up with half of your money in 10 years. It would have been fantastic idea on March 23rd.2020. Today I am not so sure. Warren Buffet said :'never invest with borrowed money '. Unless there is a way to get guaranteed 5% annual return on investment. Please let us know if there is such thing.
Robert, valid point - and although 5% guaranteed is not an option on the market, I do think that a well diversified dividend stock portfolio of blue chip stocks could likely fit the mold. I leave the portfolio management to a few firms we partner with, but historically they have been able to provide this and more over a 5 year average even through 2008, 2011, 2015 and 2020.
@@ParallelWealth I know and I agree. I have been in stocks for about 30 years. Actually retired and living off dividends. CPP and OAS just addition to my main dividend income. However, I went through ups and some serious downs and disappointments. Who would predict that sure shots like Polaroid and Kodak would end up delisted?
So all I am saying is :'past performance does not guarantee future results'. The fact that dividends became very popular and too many people think that stocks can go only up makes me uncomfortable. There were stretches in time when markets didn't go up for 17 years. Investing is the way to financial independence. But it is always good to know that it is not without risk.
What I don’t understand is how are you paying off the mortgage over 10 years if you have invested the entire 225K. Who is paying the 2050 mortgage?
The concept is to make the spread for 10 years between the cost of mortgage to investing. After 10 years (or whenever) you would pay off the mortgage and collapse the investment - leaving you with the growth and more money for retirement than you had otherwise. We have done this first hand for clients and it works great.
One best video
Thanks!
Would there be any tax benefits for borrowing from the mortgage to invest in your TFSA?
Well you can't deduct the interest. So you grow the money tax free, but can't deduct the cost to borrow. Plus max limits with TFSA. So you could look at both sides. Typically when you borrow to invest it will be larger than your TFSA contribution limit.
i also heard if u borrow money from HELOC and u invest it. u only pay half of the interest? is that correct? or i just dont understand it?
If you invest your HELOC your interest payment becomes tax deductible 😁
If you invest the money outside of a TFSA or RRSP the interest is tax deductible. Interest payable on money borrowed to invest in a TFSA or an RRSP is not tax deductible.
You didn't include the closing costs for the new mortgage, and you didn't mention what the retiree is supposed to do if they're forced to retire early, then suddenly they have no income and a $2000 a month mortgage payment they need to make by withdrawing their retirement funds, putting them at a loss compared to the conservative scenario you're using as a comparison.
Doesnt talk about the cost of the mortgage. As many here have commented.
Good video with some helpful advice. I appreciate the focus on using RRSP/TFSA's but for those (lucky few...?) that have little room remaining in either, how about a version of this video, where you cover the use of a non-registered account?
Obviously, having investments in Tax Sheltered or Tax Deferred accounts is more desirable, but there are some tax advantages of investing proceeds from a home equity loan into a Non-Registered account. For example, if individual used loan to purchase good dividend paying stocks/ETF's, some (if not all) of the loan interest would be tax deductible.
In fact, many of the Canadian Banks and Telco's have dividend payments that are much higher than current HELOC interest rates. Enabling you to not only pay of the loan interest, but also pay off the principle (while being able to write-off some of the interest against the income). If that video was already done, my apologies...I couldn't find it.
Jax we have done a few on this - even look at last video on the Smith Manoeuvre - covers this off fairly closely to what you want. Also have covered it by buying a larger home to grow tax free...
@@ParallelWealth Fair response. I'm familiar with the Smith Manoeuvre (in fact, I have read Mr. Smith's book :-). I guess I was just suggesting it was worth mentioning that non-reg accounts could also be used, affectively in some cases (in the original video). But I should've phrased my response accordingly. I'll check out the videos you mentioned. Thanks again for the great content.
Wouldn’t it make just as much sense to make as small as possible mortgage payments and invest the rest or even remortgage at an earlier age.
The drastic increases in property valves is making it more interesting to see how I can enjoy that equity while still living in it.
But I would have paid approximately $26K in mortgage interest over 10 years. You don't cover that in your video.
Interest costs are built into the scenario.
Unfortunately I took on a new mortgage 4 years ago at 44 yrs old. I'm still a long ways away from getting this bad boy paid off. What are your thoughts on one of those reverse mortgages once you hit retirement age?
Sean, using equity from your home in retirement is a decent option, but be careful how you structure it. The whole reverse mortgage set up can create a bad situation really fast - I have seen it first hand with one of my client's mom. When the time comes do your research and make sure that you aren't paying interest on interest...I know it sounds crazy but that's the way some of the big reverse mortgage shops set things up.
@@ParallelWealth I looked through your videos and didn’t see one for reverse mortgage strategies. If you don’t have one would you consider doing one. I’m 55 doing some catch-up retirement saving and I’m looking at all possible scenarios for retirement. Thanks, I
like your content!!
Looking at your videos and the numbers you use, you seem to believe that making over 100k a year and having a million dollar house is typical.
I have never met anyone in this situation, which tells me retirement will be quite difffent for me.
Fair enough. I live in the Greater Vancouver area so thats the norm unfortunately.
I also use 100k often for simple math! Even a financial planner likes to keep it simple math sometimes.
Are there situations where this strategy makes sense if you are out of RRSP & TFSA room? We have been slow paying our mortgage for a few years, and adding to our investments. But I'm wondering if we should take out more mortgage at renewal to invest in our non-registered accounts. Thanks for the great videos!
If you understand the risk associated with doing this then yes. It's not for everyone, but with current rates there can be a good spread between mortgage and investment.
Why wouldn't you use that mortgage amount to fund an unregistered account to make it tax deductible?
That's the strategy if you don't have the RRSP room.
Looking at TFSA, if fairly even between that and non reg and allow for tax deductibility.
If both RRSP and TFSA are maxed then no doubt use non reg and deduct the interest.
Everyone is smart in low interest rate environment
And historically still there.
where are u located?
Just outside Vancouver
@@ParallelWealth Thanks. Your videos are very informative and helpful. Thank you.
Adam have done any video’s on annuities for retirement..my name Francis Gomes I have been talking to you on emails Thanks
Not yet - they just don't make sense at current rates. We did a video on EQ Bank and what I think is a much better option.
I wish my mind was wired like yours!! Brilliant thinking...lost me at taking another mortgage out but you explained it well. I wish your office was located in Niagara Falls area cause I’d hire you!! Love all your videos
Ron, we work with clients right across Canada. Don't let geography stop you from getting sound advice! Happy to jump on a call to see if we can help.
What if someone is already on track with a substantial amount of money in both TFSA and RRSP.. do they still need strategy?
I believe this will add a lil bit of more stress since i will be under debt for another 10 years just to make 2k/year.
Also i really like your videos and looking for a financial planner , though im just 27 atm but i feel its better to start soon or you just take clients who are close to retirement?
Email me.
I like this plan but there are definitely risks. One of them is the timing of such a large investment (i.e. money going in close to market corrections). That said, if you're only shooting for 5% return then you're likely in extremely low risk investments. Personally I'd fire any investment advisor who only got me 5% average per year. 8-10% should almost be a no brainer.
Outstanding information and well-explained! We are in the process of doing this to take advantage of a scorching hot real estate market here in eastern ON.
Smart move and happy investing!
👌💙🙏
Pure danger. Mortgage rates will be sky rocketing soon. Only a fool becomes indebted again.
Not much data behind this happening...most economists and mortgage professionals see slow and steady increases. A quick jump would cripple the housing market - govt won't let that happen regardless.
Not likely Johnny.
@@SeanONeill13 I was right and more to come.