Investment Loans and RRSP Loans are also known as Leverage Loans.  Investment Loans are not for everyone and should be carefully considered before investing.

This investment strategy is based on Sir John Templeton's (November 29, 1912 - July 8, 2008) personal experience in 1939 where he borrowed $10,000 from his former boss with the purpose of investing to make a profit.  He purchased $100 dollars worth of every stock on the stock exchanges that were valued less than a dollar.  Within the year, he managed to repay his former boss, and he and his partner had more than $30,000 remaining*.

Any mortgage holder is familiar with leveraging.  In fact, they already have a leveraged investment, their home.

Similarly, if you have $25,000 to invest, with a leverage loan, you can have $100,000 fully invested and working for you.  This can be a prudent and wise investment strategy to help create wealth for your retirement. 

It is ever more difficult to yield high returns on investments in a short period of time without increasing exposure to risk.  Borrowing to invest is a calculated risk that should be considered carefully.

The sooner an investor begins investing, the greater potential an investor will have to achieve his/her goals.

Life circumstances sometimes affect goals, savings and good intentions; whether it be by accident, illness, or life circumstances, Canadians are often unprepared for their retirement years.

A Leverage Loan Program can strategically help accumulate wealth for qualifying Canadians.  There are a broad range of investment options, ranging from loans under $100,000 and up to $300,000.  With Interest Only Payment plans and Principal & Interest Payment plans available, investors have options to suit their objectives.

Interest Only payments

The loan amount times the interest rate (Prime Rate + applicable percentage) divided by 12 will give you the monthly payment amount.

Here's a sample calculation for a $100,000 100% Loan at an interest rate of 4.50%:

Loan ($100,000) x interest rate (4.50%)
=  Monthly payment ($375.00)

Principal & Interest payments

Monthly payments can be amortized for up to 20 years and are determined by multiplying the loan amount by the applicable interest rate factor.

Here's a sample calculation for a $100,000 100% Loan at an interest rate of 4.50% and a 20-year amortization period:

Loan ($100,000) x interest rate factor (0.00633)
=  Monthly payment ($52.75)

NOTE: the Prime Rate means the annual interest rate announced by the lending institution from time to time as being its reference rate in effect (the "Prime Rate"). The examples presented are for illustration purposes. The payment amount will vary based on loan amount, interest rate, deferral period and loan type selected.

For all investment loan products and programs, contact our office to connect you with an Advisor who will work with you to determine whether an Investment or RRSP Loan is suitable for you  and your personal financial goals and objectives.

* Sir John Templeton, Supporting Scientific Research For Spiritual Discoveries, Revised Edition, Robert L. Herrmann



Your advisor should discuss with you the risks of borrowing to invest.  MWFS works closely with clients to discuss their circumstances regarding leverage loans and leverage investing, utilizing a comprehensive process.