Feb ,7 '05 .....more mortgage info
HOW TO GET OFF ON YOUR MORTGAGE
January 9, 2005
Have you violated your New Year's resolutions yet? If one of them was to get financially fit in 2005, you'll definitely have more luck than quitting tobacco or getting lean, because it's so simple.
Here are three no-brainer mortgage strategies to get you started on the path to financial freedom.
(1) Make your mortgage tax-deductible.
Imagine - the ability to deduct from the income tax you pay the entire amount of your mortgage interest, which can account for 90% or more of your monthly payment. Sound too good to be true? Hardly. For many people, this is unbelievably simple.
That's because most Canadians with a house also have some investments, whether they are mutual funds, bonds, GICs or just cash savings. In fact, statistics show there are millions of Canadians who have as much, or more, in financial assets as they do in mortgage debt. Is this you?
If so, then take your investments, cash them in and use the money to pay off your mortgage. Now go to the bank, get a new mortgage against your house for the same amount, and use the money to buy back your financial investments. You still have a mortgage, you have the same investment portfolio, but suddenly all of the interest on your home loan is tax deductible - because the proceeds of the loan were used to buy income-producing assets.
(2) If you don't have a mortgage, get one.
Whaaa? The dream of every furry homeowner, when you rub his tummy, is always the same - to become mortgage-free. But besides the dubious logic of having all of your net worth locked in one asset (that can be quite illiquid at times), a mortgage can be your friend.
Building on the first point above, if you can borrow against your paid-off home to increase your wealth, and the interest on the loan is deductible from your taxes, then why wouldn't you do it? Instead of having $100,000 sitting in your $300,000 mortgage-less home, why not take out a home equity loan for a hundred grand and invest it in a blue chip mutual fund with a track record of growing 5% or 7% a year?
Your wealth will augment and every dollar of interest can be written off your taxable income. You pay less tax, you have more disposable income, and your house is financing a growth portfolio.
(3) Put your mortgage inside your RRSP.
Imagine if you held your own mortgage, and made monthly payments to yourself, instead of the bank. Well, this also is entirely possible!.
The tax rules allow your RRSP to hold the mortgage on your home. So, if you have a whack of cash in your retirement plan, then use that to pay off the existing mortgage on your home. Now you have effectively set up an RRSP mortgage, and you're able to make those payments to yourself.
There are rules involved here, so your mortgage rate has to be close to market levels, and you'll need an independent agent to help set the thing up. But the results can be delicious - a $100,000 mortgage can turn into $300,000 worth of payments over a couple of decades. Your pay off your house and build a fat little nestegg at the same time. If only sex were this much fun!
written by garth turner ....see www.garthturner.ca
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January 9, 2005
Have you violated your New Year's resolutions yet? If one of them was to get financially fit in 2005, you'll definitely have more luck than quitting tobacco or getting lean, because it's so simple.
Here are three no-brainer mortgage strategies to get you started on the path to financial freedom.
(1) Make your mortgage tax-deductible.
Imagine - the ability to deduct from the income tax you pay the entire amount of your mortgage interest, which can account for 90% or more of your monthly payment. Sound too good to be true? Hardly. For many people, this is unbelievably simple.
That's because most Canadians with a house also have some investments, whether they are mutual funds, bonds, GICs or just cash savings. In fact, statistics show there are millions of Canadians who have as much, or more, in financial assets as they do in mortgage debt. Is this you?
If so, then take your investments, cash them in and use the money to pay off your mortgage. Now go to the bank, get a new mortgage against your house for the same amount, and use the money to buy back your financial investments. You still have a mortgage, you have the same investment portfolio, but suddenly all of the interest on your home loan is tax deductible - because the proceeds of the loan were used to buy income-producing assets.
(2) If you don't have a mortgage, get one.
Whaaa? The dream of every furry homeowner, when you rub his tummy, is always the same - to become mortgage-free. But besides the dubious logic of having all of your net worth locked in one asset (that can be quite illiquid at times), a mortgage can be your friend.
Building on the first point above, if you can borrow against your paid-off home to increase your wealth, and the interest on the loan is deductible from your taxes, then why wouldn't you do it? Instead of having $100,000 sitting in your $300,000 mortgage-less home, why not take out a home equity loan for a hundred grand and invest it in a blue chip mutual fund with a track record of growing 5% or 7% a year?
Your wealth will augment and every dollar of interest can be written off your taxable income. You pay less tax, you have more disposable income, and your house is financing a growth portfolio.
(3) Put your mortgage inside your RRSP.
Imagine if you held your own mortgage, and made monthly payments to yourself, instead of the bank. Well, this also is entirely possible!.
The tax rules allow your RRSP to hold the mortgage on your home. So, if you have a whack of cash in your retirement plan, then use that to pay off the existing mortgage on your home. Now you have effectively set up an RRSP mortgage, and you're able to make those payments to yourself.
There are rules involved here, so your mortgage rate has to be close to market levels, and you'll need an independent agent to help set the thing up. But the results can be delicious - a $100,000 mortgage can turn into $300,000 worth of payments over a couple of decades. Your pay off your house and build a fat little nestegg at the same time. If only sex were this much fun!
written by garth turner ....see www.garthturner.ca
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