There was a really interesting article posted in the Globe and Mail this morning. (Thank you Katherine for bringing it to my attention). It concerns the levels of debt that Canadians are taking on and looks at various cities around Canada to try and figure out the net growth of wealth in certain cities. The full article is contained within this link:

Of course in my usual way I just felt compelled to reply to the post. Debt can be a widely misunderstood  term and I thought I would share here my post on the globe and Mails website.  Hopefully this is thought provoking and no too antagonistic.

My Post:

I think that many surveys like the one posted today in the globe and mail could, and I stress the word, ‘Could’ be misleading. Certainly having no debt feels like it should be a comfortable position. However, I do note with some interest that Calgary, although it appears to have the highest debt, also appears to have the highest number of investments of any city. The significance of this is two fold, first, what kind of debt do people have and second, what are they doing with the money they borrow? If you are taking on debt to buy a new TV, you could certainly argue that has very little to do with creating wealth, however, if you are taking on debt to invest that has a whole different scenario attached. There is of course many risks to borrowing to invest but just to put it out there, if you do happen to borrow money, say from a mortgage product, to invest at a higher rate of return , two pretty amazing things happen, 1. You are literally creating an income using someone else’s money and 2. There is a very good chance you will be able to write off the interest expense against your tax return. (Seek advice from an accountant) So is all debt bad, or could there be something else going on here. This may not be what is happening at all, but I do believe it’s worth investigating.

Last thought. Paying down a mortgage, good or bad?

Let me just hang this one out there. If someone today gave you an investment of 4-5% does that sound like a good solid investment? (That’s 4-5% per annum). If it does than paying down a  mortgage is probably a good thing, since by paying down a mortgage you are essentially putting money to work at whatever rate of interest you are charged on your mortgage. However, supposing you could find something that yields 8, 9 10, or even 15%, then does it make sense to pay down a mortgage or invest your funds at a higher rate. Don’t forget that when you borrow money to invest (In Ontario at least and please seek independent advice from an accountant) the interest cost is tax deductible. Hmmmm!  Question is, can you find something that yields 10% +

If you are not sure than you should give me a call and maybe we can talk about Real Estate investing, lease to own options and probably some other ideas.

Speak to you soon,


Ian Hocking,

Filed under: BarrieBarrie Real EstateEsssaInnisfilInvestment Real EstateMortgage InformationOro MedonteRental/LeaseSpringwaterStatistics

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