Purchased an investment property, best way to fund it?
Hoping to get some help figuring out the best way to fund the property we just purchased. Financing it isn't a problem. Our issue is figuring out the _best_ way to fund it. I'm rounding the numbers for ease of math. We are a common-law couple but keep our finances 100% separate.
We are debt free and have access to 140k HELOC at 4.5%.
Property purchase price: 200k
One of us can afford to pay their half (100k) from their savings account.
What we're trying to figure out is the best way for the other partner to fund their half.
Scenario 1: Take out 50k out of TFSA(TFSA Savings account paying 3% interest), 20k from non registered savings and 30k from HELOC. This was going to be our original plan.
Scenario 2: 20k from non registered savings, 80k from HELOC.
Schenario 3: 20k from non registered savings, 60k loan from life partner and 20k from HELOC.
What we're having a hard time figuring out is which way is going to be the best tax advantageous. Money invested in TFSA provides a net return of posted rate. Meanwhile borrowing money to invest in rental property allows for the write off of interest expenses, effectively making the net borrowing interest rate closer to 3% than the original 4.5% charged by the bank. By leaving the money in the TFSA, the money will keep compounding too.
If there are alternative scenarios or if someone is able to identify which one is the best way to go, help would be greatly appreciated.
Thanks in advance! (Also cross posted on reddit)
We are debt free and have access to 140k HELOC at 4.5%.
Property purchase price: 200k
One of us can afford to pay their half (100k) from their savings account.
What we're trying to figure out is the best way for the other partner to fund their half.
Scenario 1: Take out 50k out of TFSA(TFSA Savings account paying 3% interest), 20k from non registered savings and 30k from HELOC. This was going to be our original plan.
Scenario 2: 20k from non registered savings, 80k from HELOC.
Schenario 3: 20k from non registered savings, 60k loan from life partner and 20k from HELOC.
What we're having a hard time figuring out is which way is going to be the best tax advantageous. Money invested in TFSA provides a net return of posted rate. Meanwhile borrowing money to invest in rental property allows for the write off of interest expenses, effectively making the net borrowing interest rate closer to 3% than the original 4.5% charged by the bank. By leaving the money in the TFSA, the money will keep compounding too.
If there are alternative scenarios or if someone is able to identify which one is the best way to go, help would be greatly appreciated.
Thanks in advance! (Also cross posted on reddit)
Previous wins:
2007
-Fujifilm Finepix Z10FD 7.2mp (Green) 210$
-2x Xbox 360 (Oct 29 & Nov 1) 300$
-2x EA SPORTS
2007
-Fujifilm Finepix Z10FD 7.2mp (Green) 210$
-2x Xbox 360 (Oct 29 & Nov 1) 300$
-2x EA SPORTS