# Investment Loan



## Cal (Jun 17, 2009)

Was talking with a rep at the bank. He said if I were to borrow money to invest from my wife's condo (she jointly owns it with her sister, I am not on title), that i would be able to invest those proceeds in my name and claim the interest payments also in my name. So, he was basically saying I could borrow from my wife's property to invest (I am sure she would have to sign something for that to happen, lol).

Is that right? Because we are married I can do that in my name? It doesn't sound right to me, I mean if I were on title, or if my wife and I owned that condo, no problem, I get it.

A little leery of tax advice from a bank rep trying to make a commission on an investment loan.

And not really wanting to get on the bad side of CRA.

Thoughts?


----------



## HaroldCrump (Jun 10, 2009)

This would basically be a spousal investment loan i.e. your wife will be lending you money.
You can set it up as a regular spousal investment loan.
Whether this is actually advantageous for you guys or not would depend on your respective marginal rates, your income mix, risk tolerance, long term goals, and other factors.


----------



## Guban (Jul 5, 2011)

It sounds to me as if you are borrowing money from the bank, and you would be paying off the investment loan. You are not really borrowing from your wife's condo, but are using her condo to secure the loan. She is cosigning the loan.

Since you are paying the interest with your own money, and the borrowed money is used to try to make taxable income (perhaps dividends down the road?), it should be tax deductable.


----------



## andrewf (Mar 1, 2010)

You're right to not trust tax advice from a mutual fund salesperson. I don't think they are generally even qualified to offer it.

Does your wife have a higher taxable income than you? Why would it be advantageous for the investment to be in your name rather than your wife's?


----------



## Zeeshanbmerchant (Jan 4, 2014)

Well you have To do it right in that use the condo for a secured loc with your wife and I think even her sister as a consignor. Not sure about sis

Then yep you can use that money to invest and write off interest. I wouldnt borrow the money from your wife, I think that can cause complications.

Mutual funds salesmen will tell you anything to make a sale.


----------



## the-royal-mail (Dec 11, 2009)

sigh. And now the end of year shell games and mututal fund and loan sales pitches begin. You are right to be leery but why are we even wasting time thinking about such convoluted games? Just because you can do something, doesn't mean you should. The bank wants to make more money off you.


----------



## marina628 (Dec 14, 2010)

If I were the sister I would not be allowing you to leverage a property I owned .These situations are always complicated ,if you want a loan to invest do it on your own credit for many reasons.


----------



## Cal (Jun 17, 2009)

IMO the best reasoning is marina's.....I would rather not have family involved in/knowing our finances. If we have to get her to co sign, they would know how much we borrowed on that property to invest. Probably won't do it for that reason.

The only reason to borrow on the property would be to get the lower rate. Not interested in borrowing above prime. Also not interested in mutual funds. Although the bank rep knows this, he hasn't even asked me where I plan on investing it in that regard.

And yes Andrew, we would intentionally want the investments in my name for tax reasons.

Is it wrong that I trust you guys over the bank rep on tax matters? lol. :rolleyes2:


----------



## andrewf (Mar 1, 2010)

For tax reasons, all that matters is that the loan is used to purchase assets that can generate income. It doesn't matter whether how that loan is secured. 

So the two issues are separate:

1) Can you borrow against your wife's interest in a condo? Most likely.
2) Can you borrow to invest and have the loan interest be deductible? Yes.


----------



## fraser (May 15, 2010)

We do this, it is called a spousal loan. My spouse has borrowed money from me (we have demand note) at the prevailing CRA rate of 1 percent. 

I claim the interest that she pays me (must be done by jan31) as income. She claims it as an expense against the investment income that she earns from that money. It is one of the few tax breaks that we get. 

It only works if one spouse has a lower marginal tax rate. 

CRA adjusts the prescribed interest rate every quarter but once you are locked in to the rare it remains constant. The current rate is very attractive.


----------



## andrewf (Mar 1, 2010)

While you can do a spousal loan, it is not required in this case, as the loan is originating from the bank.


----------



## Cal (Jun 17, 2009)

andrewf said:


> For tax reasons, all that matters is that the loan is used to purchase assets that can generate income. It doesn't matter whether how that loan is secured.
> 
> So the two issues are separate:
> 
> ...


Yeah, I didn't know that #1 was possible and ok with CRA. Especially when I am not too confident on the source as mentioned. I figured my name had to be on title to borrow against it.

We have no interest in a spousal loan. Our intent was to leverage a little more.


----------



## Zeeshanbmerchant (Jan 4, 2014)

So based on the above say that there is a married couple

The wife wants to take $10K from the husband to buy investments. She would be better off, having him deposit $10K in the bank say in GICs, then using that as a collateral for getting a loan herself from the bank for $10K. She would then be able to write off the interest of that loan, and any intereset/gains from the investments would be on her income tax, Otherwise if the husband gives the wife the $10k, the interest/capital gain from the investments would just be attributed back to him.

Interesting work around, requires more work ofcourse.


----------

