Personal Finance

Cashing in Stocks or Mortgage?

  • Last Updated:
  • Jul 21st, 2020 8:00 pm
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[OP]
Member
Oct 12, 2010
237 posts
247 upvotes

Cashing in Stocks or Mortgage?

About 10 years ago, I had saved up about 100k for a down payment to purchase a home, i ended up deciding to continue to rent and decided to use the down payment to purchase Apple stock. The stock is now worth about 700k in a taxable trading account. I'm now again looking to purchase a house/condo, but have been trying to decide if I should just cash out the apple stock and purchase with "cash" or should I take on a mortgage. I've always been of the mindset to not take on debt if one doesn't have to, but the cashing out of this amount of stock with about 600k in capital gains (half being taxable) is something I've never done before and the sale would put me into the highest tax bracket. My tax bill next year would be more than my annual salary. I would be able to cover the tax bill by selling other investments next year so that's not too much of an issue, but a part of me thinks that with low interest rates, that it might make sense to take on a mortgage. Am I crazy for thinking this?
7 replies
Sr. Member
User avatar
Dec 12, 2005
950 posts
116 upvotes
GTA
Mortgages are cheap. I'd sell enough for a 20% down payment (and to cover the corresponding capital gains tax) but leave the rest invested but make annual mortgage prepayments if you want to pay it down faster. This way you keep taxes lower than if you sold it all in one year and you stay invested in the market longer. As for having it all in Apple.... you've been lucky but I would look at diversifying to lower risk, especially if you're depending on it to help with housing costs.
Shojin wrote:I like to quote myself.
Deal Addict
Mar 8, 2013
2808 posts
1485 upvotes
You could spread the sale of your stock over several calendar years. Also check out the First time home buyers plan from CRA. You could offset some of the capital gains by making an RSP contribution and then withdrawing up to $35,000 to buy the home. But I would not be so concerned about paying capital gains tax on your profits. Nobody knows the future, and those gains could be lost quickly. You certainly will be more diversified by having a home with a mortgage and some Apple stocks.
Sr. Member
Aug 20, 2015
517 posts
307 upvotes
Toronto
If i were in your situation I would sell just enough to cover a 20% down payment + any other fees related to purchasing a home (land transfer tax, renovations, painting, furnishing). The rest I would keep in stocks to minimize the capital gain for this calendar year.
Deal Addict
Aug 28, 2010
1281 posts
332 upvotes
Toronto
pretty sure your stocks will make more than 2.09% current 5 yr fixed rates.... get 20% out
Deal Addict
Mar 8, 2013
2808 posts
1485 upvotes
Every $ of AAPL that is not sold, means one $ borrowed at 2%+ in after-tax dollars. So that's really 3% or 4% for comparison purposes.
[OP]
Member
Oct 12, 2010
237 posts
247 upvotes
-=phelan=- wrote: What's the house price if you don't mind me asking? As housing in the GTA or Vancouver are still astronomical vs that of like Calgary/Edmonton/MTL/Halifax etc.
Haven't actually purchased yet. Prices are still high. They haven't gone up since the pandemic but there's been no crash in prices.

Thanks for the advice from the rest of you. Yes I realize that putting all my eggs into the Apple basket may have been risky, though it has worked out. Mind you, I have a feeling the stock will fall at some point, thus the other reason i was thinking of just selling it all. The stock is worth 20% more than it was pre-pandemic (as are a lot of tech stocks) which I don't quite understand, but I'm certainly not going to criticize.

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