So your saying to have the funds in another account “leverage” vice putting it in my non registered account to top up my monthly income fund. I mean I have over $80000 in my non registered account now. So, why would I have to have another account, the funds wouldn’t go below $30000 because I have investments in other stocks.

Jim

I have my leverage account as one account. And then the rest of my investments in another. If you leverage account goes below the loan value they will hold the funds in your account until the account balance goes above the loan again. I leave and extra whack of cash in there to make sure it is always above my loan amount. That way of have access to the income to pay down my leverage account. It works for me!

I have taken out $30000 out of my non registered account which is in the BMO Monthly Income Fund to purchase a new car. The account is with BMO Investorline. I am thinking of getting an investment loan but the Investment Loan Advisor is thinking that if I put the $30000 back into the BMO Monthly Income Fund that the Bank of Montreal may want authorization if I want to do further trades such as buying or selling stocks in this account. Your insight regarding this would be greatly appreciated.

Thanks,

Jim

I was talking to a BMO Investment Loan Specialist and from what I understood from her is the following. She indicated that if I got the investment loan for example $30000 and put it back into my non registered investment account (BMO Monthly Income Fund), that I would need authorization from Bank Of Montreal to do further transactions such as buying, selling stocks which I do now in this BMO Investorline Account. Is she correct indicating this? I mean if she is right that would suck because everytime I want to add more to my BMO Monthly Income Fund or buy shares of stock or sell shares of stock I would have to get authorization from BMO.

The banks approve you on investment loans like they would on any other loan. You need good credit and be able to make the payments within their lending ratios. That is awesome that you’ve got those investments working for you. Keep loving your money by investing it.

I build my own monthly income funds by buying income trusts/REITS that pay our monthly. I buy things that I know have upside like oil, pharmas and REITS and just buy the stocks right out. That way I save the management fee of a mutual fund and all my shares pay me monthly like the BMO Monthly Income Fund.

Have an awesome day,
Dave

I have a question;

At the present I don’t need a new car. And if I understand the stratergy correctly I could just get an investment loan and let it pay itself off. What kind of garantees do you need to borrow with an investment loan. I now own 28,000 share of BMO monthly income fund ( 70 % non registered 20% RRSP and 10% TSFA )

Also you comment that you create your own monthly income fund to avoid the management fees. Could you ellaborate a little step by step to see if this could be an option for me.

bets regards

The two things we can’t avoid in life are death and taxes. When I was a banker in 2000 none of my clients wanted to sell their Nortel shares and pay the taxes. For anyone who had sold at the top they sure were happy to pay all those taxes when the market corrected. Having to pay taxes can sometimes be a good thing.

Deducting the investment loan interest will get you some money back to put towards your taxes plus the fund pays tax preferred distributions. If you compare writing off the investment loan interest, plus the fund income paying back your loan, and the portfolio you get to keep when the loan is paid off vs. buying a depreciating asset and paying a lease or car loan – it’s totally worth the tax bill.
Have a great week,
Dave