What are the pros and cons of investment lending?
There are a lot of pros and cons to investment lending and your advisor can discuss them with you. One pro is that it has the potential to generate wealth. But, on the other hand it can be risky because any investment losses are magnified.
I’m interested in taking out an investment loan. How do I start the process?
The first step is to talk to your advisor to see if an investment loan is right for you.
Next, if you agree it fits into your financial plan, your advisor will complete an investment loan application and begin gathering all the required documentation.
Will I qualify for an investment loan?
We look at a number of different criteria to determine whether you’ll qualify for an investment loan. Do you have:
How much should I borrow?
That depends on a lot of factors: your financial objectives, risk tolerance, cash flow, and time horizon.
You and your advisor will work together to figure out what your number is to reach your financial goals.
If I take out a loan, can I pay it off early? Is there any penalty?
Our investment loans are fully open, which means that they can be paid off at any time with no penalty.
Can I take money out of my investment account?
If the value of the investments you purchased with your loan exceeds the outstanding balance of your loan, you may be able to take out the excess amount from your investment account.
Remember, the loan-to-value (LTV) ratio must stay within our guidelines. Talk to your advisor to figure out if and when you can take money out.
Are the interest payments tax deductible?
Generally speaking, interest paid to borrow money to earn investment income is tax deductible. When the interest is deducted, it can be an effective way of reducing the overall cost of an investment loan. Interest is not deductible in all circumstances. For example, if the only earnings your investment can produce are capital gains, you cannot claim the interest you paid. Additional restrictions apply for residents of Quebec. Please consult with a tax specialist for information on deducting interest.
Can I view my investment account online?
Yes, you can view your investment account (the account where your loan proceeds are invested) online through Investor Access.
Can I pay down the loan online, via online banking?
No, we are unable to accept lump sum loan payments through online banking. If you wish to pay down your loan, you need to contact your advisor.
What happens to my loan if there is a big drop in market values?
Depending on what type of loan you have, you may or may not need to do anything.
If you have a margin call loan, you may need to act and you should speak with your advisor to see what actions may be necessary.
If you have a no margin call loan, we won’t require any action – but you can always speak with your advisor to determine what’s right for you.
Reminder: The original amount of the loan remains payable even in the event of a large decrease in market value.