Investment Loan

There are times when borrowing to invest, (also known as leveraging), can be a useful strategy to help you grow your non-registered investment portfolio and help you build wealth. This strategy lets appropriate investors borrow money to take advantage of the long-term growth potential of investments.

A borrowing to invest strategy, or leveraging strategy, offers 2 main benefits:

• It allows you to invest a larger sum of money at one time rather than making smaller contributions over an extended period of time. This allows the investments more time to grow over the investment period and take advantage of long-term compounding returns.
• It can provide tax-savings benefits because the interest you pay on a loan used to purchase investment funds may be tax deductible.*

The strategy is not without risks, potential negative impacts can include:

• In negative markets, the effects of market volatility and losses are amplified. A leveraged purchase will involve greater risk than a purchase using cash alone.
• Increasing interest rates can make the payments higher and reduce the potential benefits.
• Borrowers are obligated to repay the loan and applicable interest regardless of the performance of the investment.
• The lender may terminate the loan, or choose not to renew.

If you use this strategy, it’s important to have the available cash flow to handle regular payments and be able to accommodate changing market conditions and interest rates.

Cash flow for payments typically doesn’t come from investment income on the investment for which you borrowed — you need to be capable of paying the loan from other sources such as employment income or other investments.

Your financial security and investment representative can help explain the risks and benefits of borrowing to invest and help you determine if this strategy is right for you. To determine tax implications specific to your situation, get advice from a tax professional.

Features**

• You can borrow a minimum of $10,000*** to purchase eligible Great-West Life segregated fund policies or mutual funds (distributed through Quadrus Investment Services Ltd.).
• There are often no margin calls for loan amounts of $10,000 to $250,000.
• There is limited underwriting for loan amounts of $10,000 to $100,000.
• You don’t require any additional security if you choose the 100% investment loan product (the bank funds 100% of the loan) with repayment of principal and interest.
• These investment loans are designed for amounts of $250,000 or less. Larger amounts will be considered case by case (depending on your specific situation) and additional conditions may apply.

Flexible payment options:

• Weekly, bi-weekly and monthly payments. In Quebec, if you choose the 3:1 product with interest-only payment (the bank loans you $3 for every $1 you pledge as collateral), only monthly payments are available—interest-only loans are set up as lines of credit.
• Competitive variable and fixed interest rates.
• You can make additional payments or pay the loan in full without penalties or fees.
• Interest-only payments if you choose the 3:1 product (the bank loans you $3 for $1 you pledge as collateral) or interest and principal (blended) payments if you choose 100% loan financing (the bank funds 100% of the loan)
• Payment is convenient through pre-authorized automatic funds transfer from your personal bank account.

Easy recordkeeping

• Regular loan statements help keep track of balances and the amount of interest paid for tax purposes.

Want to learn more about borrowing to invest?

Contact a financial security and investment representative to find out if borrowing to invest is a strategy that works for you. Or, if you’re already a Solutions Banking client, go to the Client Services section to find out more.

*At this time, CRA indicates that investments such as mutual fund trusts, corporations and segregated fund policies are eligible investments for interest deductibility purposes. CRA can change its position at any time, so interest deductibility cannot be guaranteed.

** Solutions Banking loans are subject to additional terms and conditions as specified in the Credit application you complete. All loan features are subject to change.

*** Subject to credit approvals

All tax laws can change.

For Quebec income tax purposes investment expenses (which includes interest on loans that were used to purchase non-registered investments) are only, at this time, deductible up to the actual amount of taxable investment income earned during a particular year. Investment expenses in excess of the taxable investment income in a year may be carried back 3 years or carried forward indefinitely to offset taxable investment income.

A description of the key features of the segregated fund policy is contained in the information folder and important information about the Quadrus Group of Funds can be found in the funds’ simplified prospectus. Please read these documents carefully before investing.

Mutual funds are not guaranteed. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund and segregated fund investments. Their values change frequently and past performance may not be repeated.

Any amount that is allocated to a segregated fund is invested at the risk of the policyholder and may increase or decrease in value.

The information provided is accurate to the best of our knowledge as of the date of publication, but rules and interpretations may change. This information is general in nature, and is intended for educational purposes o