Mortgage (debt) over Investing, Anyone else?

[mindflayer]

If and when that great opportunity to invest 50k comes up, let me know.

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The problem with RRSP's are that when you put money into them, if you ever take out any money before the age of 69, you are penalized & then taxed on it, So you are losing anywhere from 35-50% of what you take out depending on how much you take out.

So if you decided in 15 years you wanted 50k for some reason and you are not 65 you are going to pay about 20-25k of that back in penalties and interst when you withdrawl.


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Somehow I don't think you know much about RRSP's.
Your statement sounds exactly like ones made by friends who never have any money to put into RRSP's.
What penalties and interest are you talking about?!?

Please don't say that a witholding tax is a penalty.

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There are a lot of other options out there available to Canadians that allow for almost as much income at retirement while at the same time givng you the flexability of using your money without being penalized on it.


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I don't need the whole list, but please tell me about one or two opportunities from your list.

[AlphaGun]

For a Canadian, if you are considering investing outside of an RRSP, you are better off paying down your mortgage with excess cash and obtaining a new loan (Home Equity Line of Credit most likely). If you only use the the new loan to make investments in income producing properties (basically any investment that pays some dividends or interest) you can deduct the interest from the loan on your tax return.

This way you can probably make a better after tax return from your investment than the after tax cost of your debt in the long run.

AlphaGun

[mindflayer]

[ QUOTE ]
For a Canadian, if you are considering investing outside of an RRSP, you are better off paying down your mortgage with excess cash and obtaining a new loan (Home Equity Line of Credit most likely). If you only use the the new loan to make investments in income producing properties (basically any investment that pays some dividends or interest) you can deduct the interest from the loan on your tax return.



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For canadians, this is one of the better strategies.
I used to have $200k owing on my regular mortgage.
Now I have two lines of credit, one decreasing and one increasing in amount due. The total stays at 200k owing, (or goes down) but when the one initially at 200k gets paid down, say 10k, we have another line of credit that can go UP by a similar amount. For accounting purposes the 200k going down is the "mortage" line of credit. The 0k going up to 10k is the " investing" line of credit.
Doesn't always happen this way because we don't always have somthing to invest in.

In the past, this was not a common option because with a regular 200k mortage owing.. then later 190k owing.
The first time we tried yo get a 10k loan from the bank to invest, our Mortgage had to be reassesed/home inspection/credit review/insurance review/ etc. typically a $300 fee charged by the bank to do.
A knowlegable banking friend of mine suggested to convert our conventional mortgage to lines of credit. This way, you didn't have to do any reviews to get extra loans, as long as your total line of credit didn't go over the 200k (and of course you made the regular monthly payments).
For accounting it is very easy as 100% of the interest on the "investment" line of credit is tax deductible.

[raptor517]

the feeling of having your home paid off is much better than squeezing out an extra 1-2% a year in the ol portfolio. this isnt even close imo.