Are our investment loans right for you?
Yes, if you:
- Plan to invest for at least 10 years
- Have enough income to make your loan and tax payments
- Have a high risk tolerance and feel comfortable with an approach that magnifies gains or losses
Benefits of an investment loan
Rates & fees
Our investment loans offer a competitive interest rate on the money you borrow.
100% Investment Loan
Up to $100,000
Principal & interest payments
Multiplier Investment Loan
Up to $100,000
Principal & interest payments
|Fee for non-sufficient funds (NSF) processing||$45.00|
|Fee for withdrawals
(after two free withdrawals per calendar year, subject to approval)
1 Interest is calculated on the closing daily balance and paid monthly. The applicable tier rate is paid on every dollar. All rates are annual rates unless otherwise stated and are subject to change without notice
2 Always confirm whether this applies to your investment loan with an accountant or financial advisor.
3 We may ask you to also make a principal and interest payment if the value of your loan reaches 125% of the value of the investments you purchased with the loan.
* Borrowing to invest may be appropriate only for investors with higher risk tolerance. You should be fully aware of the risks and benefits associated with investment loans since losses as well as gains may be magnified. Preferred candidates are those willing to invest for the long term and not averse to increased risk. The value of your investment will vary and is not guaranteed however you must meet your loan and income tax obligations and repay the loan in full. Please ensure you read the terms of your loan agreement and the investment details for important information. Manulife Bank of Canada solely acts in the capacity of lender and loan administrator and does not provide investment advice of any nature to individuals or advisors. The dealer and advisor are responsible for determining the appropriateness of investments for their clients and informing them of the risks associated with borrowing to invest.
Investment leverage simply means borrowing money to buy investments. When you borrow to invest, you magnify your investment returns because you are investing a larger amount of money. That works for you if your investments are increasing in value and your investment returns are positive – but it works against you if your investments are decreasing in value and your investment returns are negative. Gains and losses are magnified with investment leverage. That’s why investment leverage is only appropriate if you have a higher risk tolerance and are investing for the long term. Also keep in mind that no matter what happens in the markets, with investment leverage you still have to meet your loan and tax obligations.
That depends on your individual situation and we strongly recommend you discuss it with your advisor. Our investment loan calculators can help you explore different loan amounts and interest rates so you and your advisor can make a more informed decision. With the interest-only investment loan calculator, you can set two of three variables – the monthly payment, principal loan amount, or interest rate – and see the impact on the third. With the principal and interest investment loan calculator, you can set the term, principal loan amount and interest rate and see a complete schedule of monthly payments until the loan is paid off.
Let’s say two people, Liz and Mike, are both saving for a dream vacation in 10 years. Liz saves up and contributes a lump sum at the end of each year to her non-registered account. Mike borrows $100,000 from Manulife Bank to invest right away. During the next 10 years, Liz contributes $28,991 and pays $555 in tax for a total cost of $29,467. Mike makes interest-only payments of $28,991 and pays $555 in tax for the same total cost. Both investors earn a 5% return on their investments. After 10 years, they sell their investments, pay their taxes and Mike pays off his loan. Liz has $35,066 to spend on her vacation. Mike has $52,277 – over $17,000 more.
This example assumes that Liz makes end-of-year contributions equivalent to Mike’s net cost of borrowing. Mike’s investment loan interest rate is 4.5% and his interest payments are 100% tax-deductible. For both Liz and Mike, the annual taxable portion of their fund return is 20%, the tax rate on income allocations from funds is 30%, and the marginal tax rate is 45%. All assumptions are for illustration purposes only. Results will vary slightly for Quebec residents.
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