Gary and Eva are like a lot of Canadian couples moving into their 50s.

After years of focusing on paying off their mortgage and living within their means, they are now mortgage free. They made their last $1,500 mortgage payment in June.

They dream of a retirement that includes travel and continuing to indulge in their shared hobbies, but they’re worried their current savings approach won’t be enough.

Situation

Gary and Eva are not sure whether putting the extra $1,500 a month into traditional savings strategy will achieve their financial goals.

Recommendation

On the advice of Eva’s co-worker, the couple meet with an accredited financial advisor, Thomas, with 20 years experience. Working together, they review Gary and Eva’s current financial objectives, risk tolerance, cash flow and retirement goals. They agree that a traditional approach may not reach their goal of winters spent in the sun on a beach - they need to accelerate their savings.

Solution

Thomas recommends a borrowing to invest strategy as a way to increase the couple’s retirement savings.

  • $200,000 investment loan
  • Interest rate of 3.75% (Prime +0.75%)
  • Amortization period of 15 year
  • Loan paid off before the couple plans on retiring at 65
  • Monthly payment of $1,454.44 includes principal and interest

The combination of amortization period and payment types means the loan will be paid off before the couple reaches their planned retirement age of 65.

Results

Gary and Eva review the numbers and the potential risks associated with borrowing to invest. They know that the loan must be paid back, regardless of the value of the investments, but are comfortable with the risk.

Based on an annual rate of return of 6% - after 15 years, Gary and Eva will have paid out a total of $200,000 in principal and $61,800 in interest.

However, their investment savings will be worth $479,311, a net gain of $217,511 that will help them achieve their retirement goals.

  • Value of $200,000 investment after 15 years is $479,311.
  • $61,800 Interest paid
  • $200,000 Loan amount
  • $217,511 Net gain
Graph - Value of $200,000 Investment After 15 Years

Calculations are for illustration purposes only. Actual rates and amounts may differ. Investment Loan Stories, and the figures contained therein, are hypothetical examples and are not intended to project or predict actual results. Please Note: The images of persons featured on this web site are images of models and are used for illustrative purposes only; none of these images are actual clients of B2B Bank.

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B2B Bank does not provide investment advice to individuals or advisors and does not endorse or promote any investment products. While investment loans have the ability to magnify gains, they also have the potential to magnify market losses. Leveraging involves greater risk than purchasing investments using only your own cash resources because it has the potential to magnify investment losses. The dealer and advisor, not B2B Bank, are responsible for determining the suitability of investments for their clients and for informing them of the risks associated with borrowing to invest. B2B Bank acts solely in the capacity of lender and loan account administrator. Any loan approval from B2B Bank should not be construed as an endorsement of any investment choice, program or strategy. All loans are subject to credit approval and borrowed monies are due and payable regardless of the performance of the investments purchased. B2B Bank reserves the right to request additional information or documentation at its sole discretion. The B2B Bank Investment Loan Program is available exclusively through licensed financial advisors. ®B2B BANK is a registered trademark of B2B Bank.