Invest with mortgage line of credit - Good or bad idea?

[Kiwi Mustache]

I do this.

I have a rental property, have a line of credit and keep 10-15k in there. When it is built up enough I invest into individual shares. This allows me to offset the interest expense on my share portfolio as part of my overall investment strategy.

I'll continue doing this for many, many years as I see it as a great way to build my net worth. I also really enjoy the process, investigation and monitoring of the stock market and I've done quite well out of it. Much better than just paying back the mortgage and not investing elsewhere.

As long as you know what you are doing, it works out better off.

[Seppia]

I would consider this too risky during a strong bear market, but investing using credit after a 7 year long super bull market AND with USA stocks valued at extremely high levels seems borderline insanity.

[matchewed]

Until the bank cancels your line of credit...

[Stasher]

I say absolutely yes as you live in Canada and ONLY if it falls under the criteria listed and summarized perfectly in this article from Boomer&Echo . Year-end optimization of RRSP contribution and maximizing tax return and immediately paying off the loan.

http://boomerandecho.com/how-to-supercharge-your-rrsp/
http://boomerandecho.com/rrsp-loan-turned-12000-contribution-20000/
http://boomerandecho.com/borrowing-to-invest/

[BarbeRiche]

I say absolutely yes as you live in Canada and ONLY if it falls under the criteria listed and summarized perfectly in this article from Boomer&Echo . Year-end optimization of RRSP contribution and maximizing tax return and immediately paying off the loan.

http://boomerandecho.com/how-to-supercharge-your-rrsp/
http://boomerandecho.com/rrsp-loan-turned-12000-contribution-20000/
http://boomerandecho.com/borrowing-to-invest/

RRSP are both maxed out already.  I would definitely use it if a certain year we can't max our contributions.

Thanks for posting the links!

[Le Barbu]

Is your TFSA maxed out also? RESP?

[BarbeRiche]

Is your TFSA maxed out also? RESP?

RESP : I have no children yet (for the next 2 months..!) so I can't contribute yet.

TFSA : Lots of room left.  Sitting @ 31k for the both of us (all contributed this year).

I don't think I could deduce the interest that I would pay if I invest in my TFSA, right?

Are you using a HELOC to invest?  What are your thoughts?

[Le Barbu]

Is your TFSA maxed out also? RESP?

RESP : I have no children yet (for the next 2 months..!) so I can't contribute yet.

TFSA : Lots of room left.  Sitting @ 31k for the both of us (all contributed this year).

I don't think I could deduce the interest that I would pay if I invest in my TFSA, right?

Are you using a HELOC to invest?  What are your thoughts?

To make a long story short, we did it backward. Couple years ago, we decided to crush the mortgage badly. Now, principal is around 50k$ so we used the HELOC for about 150k$ to buy ZCN into our taxable account. Now, we slowed down the mortgage and fill the TFSAs as fast as we can. Both strategy work well. The TFSA route is better if you are in a low tax bracket and dont like keeping track records in case ARC inquiry.

[FrenchStache]

It sounds like a good idea when you remove risk out of the equation. Personally I think investing with borrowed money is a recipe for disaster.