Discussion on article: 40 Years Amortisation now available with 5% Downpaymnt
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Posted on: 28-09-07 00:28:13
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It is a trap. To payoff 300K mortgage, one has to earn atleast 950K. How???
In 25 yrs amortization with 6% lending cost one will be paying 275K in interest alone. Now that is after tax. At 40% tax bracket, one has to earn 950K, pay 375K in taxes, pay 275K in Interest and ofcourse 300K Principal amount of mortgage. So the more amortization you have you end up in more interest paid to mortgage company. What is the point giving all your savings in interest over 40 years and trying to save in RRSP and RESP? It is a joke.
Want to know more?? Pls contact: John 647 388 2836
Quote:
Originally posted by johnfca
It is a trap. To payoff 300K mortgage, one has to earn atleast 950K. How???
In 25 yrs amortization with 6% lending cost one will be paying 275K in interest alone. Now that is after tax. At 40% tax bracket, one has to earn 950K, pay 375K in taxes, pay 275K in Interest and ofcourse 300K Principal amount of mortgage. So the more amortization you have you end up in more interest paid to mortgage company. What is the point giving all your savings in interest over 40 years and trying to save in RRSP and RESP? It is a joke.
Want to know more?? Pls contact: John 647 388 2836
Is it better than paying $1500 in rent every month average for 40 years, thereby shelling out $720,000 and NOT OWNING anything at the end of 40 years???
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Chandresh
Advice is free – lessons I charge for!!
Not really.
By contributing to your asset, you are creating an asset which has growth irrespective of your mortgage.
But the intention should be to pay-off faster so that you pay less interest to mortgage company. It does not mean that you have to burry your money into the house. Whether you pay principal or not, whether you have mortgage or not, your real estate value grow according to the local community price.
Have a descipline to grow your investment (principal payment here) outside the house rather than burrying in bricks and mortar. In that case you could have 2 assets: House and Investment. Both grow in value and work for you. Also you will have the interest deductibility from your salary or any other income. Make your mortgage interest tax deductible.
Make government your partner to build your wealth.
In most cases, Borrow to invest in open funds is better than building RRSP.
You must own atlest one house to route your investments.
Want to know more?
Get FREE Advice. I do not charge my clients. And you have no obligation also. Have an understanding about what you do especially about finance because we all know how to work for money and do not know anything about how money can work for us.
Pls contact John 647 388 2836 or email me johnfca@gmail.com
Quote:
Originally posted by johnfca
It is a trap. To payoff 300K mortgage, one has to earn atleast 950K. How???
In 25 yrs amortization with 6% lending cost one will be paying 275K in interest alone. Now that is after tax. At 40% tax bracket, one has to earn 950K, pay 375K in taxes, pay 275K in Interest and ofcourse 300K Principal amount of mortgage. So the more amortization you have you end up in more interest paid to mortgage company. What is the point giving all your savings in interest over 40 years and trying to save in RRSP and RESP? It is a joke.
Want to know more?? Pls contact: John 647 388 2836
I just want to know how did u calculate 40% tax bracket and 375 K in taxes. Can you elaborate this. Did you talk about which tax mean property tax, It or any other. I am curuious to know this beause I am gonna made a decision in near future.
Thanks in advance
The Tax is the income tax you pay to the Government, the CRA (previously CCRA).
The mortgage payment is your after tax money. So to pay 300K mortgage and 275K interest over a period of 25 yrs you have to earn 950K income before tax is paid
Income Tax on 950,000 x 40 % = 380,000 or 375K
hope you are clear.
Mr FCA,
chekram is asking you where did you get the rate of 40% from? At what level of income?
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Chandresh
Advice is free – lessons I charge for!!
