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Mortgage / Loan / Investment Questions & Scenario

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  • May 7th, 2012 2:49 pm
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Deal Addict
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Mar 28, 2004
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Mortgage / Loan / Investment Questions & Scenario

I have a couple of questions.

Let's say for example, you're living in a house worth about 180k with zero owing on the mortgage. You have zero debt.

You want to take on a new mortgage and move to a house that's about 400k.

We can get a 10 year mortgage at 3.89% or 5 year at 3.29%

What makes the most sense?

1) Put the entire 180k down?
2) Put down 130k down, keep 50k aside for upgrades, repairs and things you want to fix (older house).
3) Put 100k down, invest 75k or so into a monthly income fund.

Or none of the above? I realize tax implications with investments - just curious if there are opinions or suggestions?
3 replies
Deal Addict
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Jan 28, 2012
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Really, it depends on your situation, all are valid.

If you want the lowest mortgage payment go with 1.

If you need the money for upgrades go with 2, so that you don't have to borrow 50k for reno's later.

I wouldn't go with 3 personally, but if you feel the need to top up some RSP's or something it would probably be a good idea. Sure you could probably make more than the mortgage rate, but is it really necessary? Just go with option 1, and take the extra you are saving on mortgage payments and start doing monthly contributions to some investments.


Option 2 for me. Actually I would probably also keep around 10k as an emergency fund.
Deal Addict
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Mar 28, 2004
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Thanks for the input.

There's a big emergency fund on the side.

I just wondered if there was a way to invest at say 6% (or anything about 3.89%) and withdrawal on a monthly basis to make the payments, and still end up ahead. Not sure if that logic makes ANY sense :-)
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Jan 28, 2012
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Well yeah, you make money as long as you are earning enough on the investment to cover the extra interest on your mortgage and any taxes on those earnings.

If you really want to borrow to invest you are better off setting up a proper investment loan, so you can deduct the interest charges to help increase your spread. You can't do that on a mortgage.

If you cant deduct the interest payed, and make sure your investments are tax advantaged as much as possible, then borrowing to invest isn't usually (as) worthwhile. And that's basically what you are suggesting, in a roundabout way.

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