An investment loan puts a lump sum to work from day one. You pay only the interest each month, and interest on money borrowed to invest is generally tax-deductible. In 15 minutes we'll tell you whether it fits your numbers, including when it doesn't.
No fee · No obligation · Leverage magnifies losses as well as gains.
Illustrative client
Client W · 40 · AI consultant
$500,000 investment loan, age 40 to 85
+$306k
more tax saved, age 40–65
+$711k
left at 85, after tax
Illustrative, not a real client. Alberta, $300,000 income, the same $45,000 a year saved either way, the same RRSP contributions in both, 5.20% interest-only loan kept to 85, 7% returns before 2.5% fees, $120,000 a year spent in retirement. Returns are not guaranteed; in weaker markets the loan can finish behind.
Run your own numbersHow it works
Borrow
$100,000
An investment loan, approved on your income and net worth.
Invest
Day one
The full amount goes to work now — not twenty years of monthly savings.
Pay interest only
≈ $433 / mo
At 5.20% variable. No principal payments while the loan is in place.
Deduct the interest
At tax time
Interest on money borrowed to invest is generally deductible. Confirm with your accountant.
“My RRSP contribution isn't enough of a deduction.”
Interest on money borrowed to invest is generally tax-deductible — and unlike an RRSP, it isn't capped by contribution room.
“I believe in the market long-term. I just don't have enough in it.”
A lump sum gives you meaningful exposure now, instead of a position that takes decades to build a little at a time.
“Saving $200 a month, it takes me 20 years to reach $50,000.”
About $217 a month in interest (at 5.20%) puts $50,000 to work today — a similar monthly outlay, invested twenty years sooner. The $50,000 is still owed.
“Every time I take money out of my company, I pay tax on it.”
Deductible loan interest can offset part of the income you draw from your corporation, so more of it actually reaches you.
“My RRSP is so big, the tax when I retire scares me.”
Draw it down gradually and let deductible interest offset the tax on each withdrawal — the approach usually called an RRSP meltdown.
“After my RRSP contribution, there's nothing left to live on.”
Invest through a loan and pay interest only, instead of squeezing a lump contribution out of this year's budget.
An investment loan lets you borrow a lump sum, invest it, and pay only the interest each month. The investments are held as security for the loan.
The appeal is time: instead of building a portfolio out of monthly savings over twenty years, the full amount is invested from day one. The risk is the mirror image — if the portfolio falls, the loan does not.
This page explains how these loans are assessed in Canada, what disqualifies an application, and where we decline to proceed. It is not a recommendation to borrow.
Go straight to your question
Who qualifies
Net worth, the 40% debt service test, and what gets declined.
Is the interest deductible?
Paragraph 20(1)(c), and what breaks the deduction.
100% no margin call
Why a paper loss can stay on paper.
If the market falls
What actually happens to the loan, and to you.
vs a margin account
Both borrow to invest. Only one can force a sale.
Immediate Financing Arrangement
The insurance-funded variant, and who it fits.
Most applications are decided by two ratios before anyone looks at anything else.
Total monthly debt payments divided by gross monthly income. It includes the new interest, your mortgage, car loans — and 10% of every credit card balance, not the minimum payment. That last one is the most common reason a ratio comes out higher than expected.
Worked example
Gross monthly income $12,500 · existing payments $3,000 · new interest $500 → $3,500 ÷ $12,500 = 28%, inside the limit.
40% is a hard line, not a guideline. Cross it and the application is declined automatically — there is no judgment call on that number.
Net worth is total assets minus total liabilities. Someone with $1,300,000 in assets and $453,000 in liabilities has $847,000 of net worth, so roughly $420,000 would be the ceiling — regardless of income.
Both tests must pass. Strong income does not compensate for thin net worth, and a strong balance sheet does not compensate for a high debt service ratio.
Under two years in your current role. Employment under 24 months is a common decline, even with high income.
Credit history. Lenders in this space look for a well-established file, and you must consent to a credit check before an application can proceed.
Newly arrived in Canada. Most programs expect a couple of years of Canadian credit and tax history.
Income that cannot be documented. Notices of assessment and pay records matter more than what the income actually is.
You borrow the full amount invested. If the portfolio falls, you are not asked to top it up. You keep paying interest and the position stays intact. This is the structure we use by default.
You contribute capital and borrow two or three times more. Larger position, but these structures can carry a margin call: if value falls past a threshold, you may be required to pay down the loan at the worst possible moment.
The margin call clause is the single most important term in the contract, and the one most often skimmed. If you take nothing else from this page: find out whether the loan you are being offered can be called, and under what conditions.
| Investment loan | Margin account | |
|---|---|---|
| Payment | Interest only, fixed monthly | Interest accrues in the account |
| Forced sale | None on a 100% no-margin-call structure | Yes — broker can liquidate |
| Rate | Set at approval, tied to Prime | Broker rate, changes |
| Assessed on | Debt service and net worth, once | Position value, continuously |
The practical difference is what happens on a bad day. A margin account can force you out of a position at the bottom. A no-margin-call loan cannot.
Interest on money borrowed to earn income from property is generally deductible in Canada — but that word is carrying weight. Deductibility depends on how the loan is structured, what the funds actually purchase, and whether the paper trail holds up.
Two things routinely go wrong:
Return of capital distributions. If a fund pays out return of capital, the deductible portion of your interest can be reduced proportionally. Many people never adjust for it.
Record keeping. The burden of proof is on the taxpayer. Borrowed funds mixed with personal money are difficult to defend afterwards.
We do not provide tax advice. We work alongside your accountant, and on anything involving corporate structure we expect one to be involved.
This decides more applications than the approval math does, and it is not the same question as whether you can afford the loan today. The interest is due every month — including the months when nothing else is going well. Where that payment comes from is the plan.
Can I pay it out of my TFSA?
Not as a standing arrangement. Picture the year the market is down: to make the payment, you sell inside the TFSA while it is down. You have forced yourself to realise a loss in order to service a loan — and the contribution room you just used does not come back the way the money did.
There is a version of this that holds together. In a year where the account is up, taking part of the gain out and setting it aside as an interest reserve is a closed loop. The difference is whether you are spending profit, or eating into principal at the worst possible moment.
Can I pay it from a HELOC?
No, and this one is not close. Paying investment loan interest from a home equity line of credit is servicing an investment loan with consumer debt. It happens in the market. We will not arrange it.
The reason is what happens when income stops — a layoff, a disability, an accident. The interest does not pause. Now two credit facilities lean on the same paycheque, and one of them is secured by your house. A 100% no-margin-call loan cannot force you to sell, which is exactly what makes this feel safer than it is. It does not stop the chain breaking somewhere else.
What if cash flow is thin but I want the deduction?
Start smaller than you want to. On a $50,000-$100,000 loan the interest runs a few hundred dollars a month at the rates in effect as this was written — a figure that moves with rates, so confirm it rather than trusting this page. Carry that comfortably for a few years before considering anything larger.
If a second position is ever added, we want the first one well clear of its cost base first. On a $100,000 loan that means something closer to $150,000-$160,000 — enough room that a serious drawdown does not put it back underwater. That is a judgement about margin of safety. It is not a prediction that the account will get there, and it is not a level at which leverage becomes safe.
We will not recommend leverage to someone whose income is not stable. The interest payment does not pause when your income does.
We will not structure a loan that only works if markets cooperate. If the plan fails at a 20% drawdown, the plan is wrong.
We will not advise on securities or mutual funds. Our licensing covers life insurance and segregated funds. Anything outside that goes to the appropriate licensed professional.
We will not promise a return, a tax outcome, or an approval. Any of those in writing from an advisor should worry you.
We will not arrange a loan whose interest is paid from a HELOC or other consumer credit. That is borrowing to service borrowing. When the income stops, both lines are still due — and one is secured by your home.
We will not proceed where there is no cash flow to carry the interest. If the payment depends on selling something, the payment depends on the market. These applications get declined, however much the client wants the deduction.
We will not proceed where the numbers work but the client cannot sleep. Leverage that costs you your peace of mind has already failed.
We run your debt service ratio and net worth before any application is submitted. If either test fails, you find out here, not after a credit pull.
Submitted to the lender; approval comes back with the amount, rate and term, which may differ from what was requested.
Loan agreement, hypothecation, and the investment application, signed electronically.
Funds are advanced and invested per the plan.
Annual review, with attention to the drawdown scenario, not just performance.
Borrowing to invest involves risk, including the risk that the value of your investment falls while the loan remains payable in full. This page describes how these arrangements work in general and is not a recommendation to borrow or an offer of credit. Suitability depends on individual circumstances.
The 40% debt service limit, the 50%-of-net-worth cap, and the tests people miss.
Whether the loan can be called is the most consequential clause in the contract.
The loan does not move when the portfolio does. Including whether you can lose more than you invested.
Both use borrowed money. Only one of them can force you to sell.
Paragraph 20(1)(c), the return-of-capital trap, and what the records have to show.
Lender minimums, who the structure suits, and how the capital dividend account fits.
Where borrowing to invest sits against consumer debt, and the questions to settle before any of it applies.