The word mortgage comes from old French for death pledge. Fitting, once you do the math on what one actually costs. Take a $600000 mortgage at today's five-year fixed rate of about 4 percent, paid over 25 years. You pay back the $600000, plus roughly $359000 in interest on top of it. And none of that interest gives you a cent of tax back, because in Canada interest is only deductible when you borrow to invest. Borrow to buy a house and it is not deductible. You can change the type of that debt without adding a single dollar to what you owe. It works with a readvanceable mortgage, which just means a mortgage with a line of credit attached that grows a little every time you pay the mortgage down. Each payment frees a bit of room on that line. You borrow the room, invest it in something expected to earn income, and that slice of debt becomes tax deductible. Same total balance. Different tax treatment. Over the years the whole thing slowly converts. Say you get the deductible portion up to $100000. At about 4.95 percent that is roughly $4950 of interest a year, and at an Ontario marginal rate near 44 percent you get about $2180 of it back at tax time. Every year. You do not owe more at the end than at the start. But the money you borrow is now invested, so the market can drop while you still owe the balance. It only works with stable income, a long horizon, and a stomach for swings. The tax rules are picky too. The borrowed money has to move straight into the investment through its own account, never mixed with personal cash, or you lose the deduction. ome to the free zoom tonight: https://masteryourmortgageinfo.com
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