Planning a nest egg on the equity that you built in your house

Hello to all, I wanted to share some information that I deal with everyday that I am not sure if Canadian homeowner's are aware of. This is aside from the business perspective but still tied into it because we are all here to make money but also save money in the long run. A lot of financial institutions offer what is called a "total equity plan mortgage" or some name close resembling that. The concept of this type of mortgage is that you can take the equity that you have built in your house (up to 75% of your home's total worth) and after paying some of it off with your hard earned money you can borrow some more on a line of credit. What? :-( You are probably asking yourself. Why would I want to take on more debt? This is smart debt to take on, if one can do it.

There is a trick to this logic, when borrowing on the equity of your home; you are only required to pay back interest only. The trick is to have your money invested earning between 10 to 12%; on good years up to 18% and build your nest egg. The interest you are paying because you are a Canadian citizen is fully tax deductible if it is used for investment purposes only as per Revenue Canada guidelines on schedule 1 of a T1 general.

With this type of a plan you can finally earn equal to what the bank earns off of borrowing your money and reinvesting it, while it is sitting in your cozy, high paying 0.2% savings account. This is one of the many tricks that banks never tell you about that over time are savings that could have resulted in much larger nest egg, in addition to the money refunded in your pocket at year's end by Revenue Canada as per the interest deduction mentioned above.