Posted on: 21-09-11 10:15:34
Hi guys,
I have plan to use LOC (Home equity) for down payment on investment home?
At this point LOC cost me prime + 0.5.
I had some offer form my credit card companies to borrow money with 0.9% or 0 % with some processing fees. I will have to compare but if this cost me less than the prime + 0.5, can i borrow money (for 6 or 10 months depending on terms) and transfer on my above LOC account.
After terms (6 or 10 months), I will have to transfer money from LOC account to back to credit card company.
For example:
50K LOC with 3.5% used on investment home.
transfer 20K for 10 months from other credit card company (with 1% interest including processing fees) to LOC account
For this 10 months, I will save 2.5% on 20K = $416.
After 10 months, I have to transfer 20K from LOC to credit card company (because there is no way I will have extra 20K saving in 10 months).
Do you think this is right way to go for it?
Also, interest is on investment home.
Do you think I can claim interest for this 10 months (3.5% on 30K and 1% on 20K means whatever I have paid to creditcard company and LOC account) for tax refund?
Do you think after doing above exercise I can continue to claim interest on 50K? (These txns doesn't show money goes to investment home.)
Thanks,
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It sounds ok, even though my head is spinning from all your complicated transfer schemes 
You have to make sure there is no inter-mixing of investment with personal transaction.
That is, do not use that credit card for any personal transactions.
Keep track of all the paperwork and all the statements, etc.
Both the interest paid on the CC and the LOC should be tax deductible in your case.
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"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."
-- Rhett Butler in "Gone with the Wind"
Thanks for quick response.
if this is better way to save interest, some people must have gone through this.
Anyone has an experience?
Thanks,
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Success is Never Ending and Failure is Never Final.
Quote:
Originally posted by meitsme
Thanks for quick response.
if this is better way to save interest, some people must have gone through this.
Anyone has an experience?
Thanks,
Just ensure you treat the credit cad account like a Business Account and not even a single personal transaction should appear.
Quote:It is hard to keep switching from one 0% credit card to another to save interest - it is doable but an accouting and maintenance nightmare.
Originally posted by meitsme
if this is better way to save interest, some people must have gone through this.
Anyone has an experience?
You are better off doing this only once or twice and securing a low interest HELOC, such as at Prime or Prime - 0.50%.
Alternatively, you can capitalize the interest.
That is, set up a separate loan account to pay the interest on the first loan.
This is acceptable by the CRA and both the interest payments are tax deductible, however, you need to maintain both accounts separately, maintain clear paper trail and never mix personal transactions with any of these.
Keep in mind this will work out for you as long as your investment property is cash flow +ve.
If you are losing money monthly on your investment, this will make it worse.
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"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."
-- Rhett Butler in "Gone with the Wind"
