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.
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.
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 (LLQP) 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 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.