Historical article note: This article was originally published on 2018-10-31. Rates, policies, home prices, statistics, product names and qualification standards reflect the environment at that time and may have changed. This archive is for historical record and general education only. It is not mortgage approval, investment, legal or tax advice.
Sometimes on the application form sent by a mortgage applicant, the loan amount column is filled in with "maximum". Do you want me to guess? Or do you trust me to do my best? Or to vent an emotion? Applying for a mortgage loan is not a pleasant thing for most people. Being approved after layers of review by the bank is the most romantic thing that the applicant can think of. The loan amount mainly depends on income, and it is "taxed" income, NO tax, NO loan. If you pay too little tax, you will have to apply for a loan. If you pay too much tax, you won’t be willing to accept it. If you want to buy a house or invest in real estate, you cannot avoid the issues of income and taxes. After buying an investment house, the situation is completely different. The loan interest, local taxes, and management fees of the investment house can all be tax deducted. It is very similar to running a small business. There are many tax deduction items for gross rental income. After selling, you will be taxed as capital gains. The tax rate is low, and you can also use financial leverage. Such a good thing with low investment and high output, high income and low taxes requires first bitterness and then sweetness, delaying a certain sense of satisfaction, setting a goal, and not forgetting the original intention, so as to achieve it all the time.
Taxes determine the joys, sorrows and joys of Canadians' lives, whether they have to rush to work, whether they live in peace or whether they live in poetry and distant places. Many Chinese friends around me feel that living in Canada is awkward. The reason is that they feel that they pay too much tax and part of their income is taken away by the government before wages are paid. Self-employed people are even more troubled by paying less tax - they are afraid of being investigated for tax evasion and are reluctant to pay truthfully. When I first came to Canada, I was very unaccustomed to it, so I went around asking experts for advice, and got a lot of "points" on how to avoid taxes reasonably. After dealing with the tax bureau once, I finally learned this: living in Canada, if you want to sleep peacefully and pay taxes without heartache, there are only two ways - 1. File taxes truthfully, 2. Make less money. Most of the other techniques are heretical. Canada mainly uses direct taxes, that is, the government directly taxes individuals, with high personal tax rates and low corporate tax rates; personal income tax, local tax, land transfer tax, consumption tax HST... all "tax" directly to the people; China mainly uses indirect taxes, with high corporate tax rates and low personal tax rates. In addition to taxation, China's state-owned enterprises make a relatively large contribution, while Canada has almost no state-owned enterprises, and government expenditures at all levels depend entirely on taxation. Therefore, tax laws are enforced very strongly to ensure that the country's important weapons are not abused and the country's foundation is not shaken. The Chinese who first came to Canada were neither familiar with nor understood this characteristic of Canada. After living for a period of time, some people understood it, but many people still persist in it and live in pain. In Canada, everyone has three most important report cards. The first is the physical examination report, which is left for you and your closest relatives to see. The second is the credit record, which is shown to the bank. The third is the personal tax return, which is also shown to the bank. If you are doing business, there is a fourth report card, that is, the company's financial report, which is still shown to the bank. After leaving school, all previous results will be invalidated. If you don't declare taxes on your income, or if you file less taxes, you won't get a bank loan. Borrowing money is much faster than saving money. Without the help of the bank, you can only live in the present. With the help of the bank, you can have poetry and a distant future. Some self-employed small business owners, in order to pay less taxes, include the milk they drink as company expenses. Both the corporate and personal financial reports are ugly, and banks will not lend money to applicants with poor grades. Canada is a capitalist country. Immigrants who do not understand the nature of "capital" will be worse off than in their original country. If you don’t make capital and investment work for you, capitalism as a whole will pass you by, and you’ll be economically in the Stone Age. The design of capitalism is that the strong become stronger and the weak become weaker. People who come to Canada without carrying a bag of money can still obtain capital locally, that is, by paying taxes, borrowing "virtual capital" - loans from banks, and integrating into capitalist society.
The amount of taxes paid has nothing to do with social security benefits, but is closely related to borrowing capacity. No matter how much taxes you pay when you are young, the pension provided by the government is the same after retirement, and the poorer you are, the bigger the pension is. People who pay more taxes pay their own taxes and support others in their old age. Loans are different. The more taxes you pay, the stronger your borrowing ability is. At the current interest rate, your borrowing ability is 5 times your annual income. For taxpayers with an annual income of 93,200 to 144,000 yuan, the personal income tax bracket in Ontario is 43.41%. For every additional 10,000 yuan of personal income declared by people in this income range, they will pay an additional 4,341 yuan in tax, and their borrowing capacity can increase by 50,000 yuan. Taxes: Borrowing capacity = 1:10. If you want to replace active income with passive income when you retire, you don’t need to rely on social security. When you are young and your income is high, you must use fictitious capital such as loans to build an asset package with mortgages as the core, postpone the current sense of satisfaction for poetry and the future, reject the current complacency, and strive to squeeze into the bourgeoisie. In fact, it's the same in China. I recently read Ou Shen's new book "How to Get Real Wealth" and the same point was mentioned in the chapter "Quick Tips on the Property Market": Going to work is to pay the "four golds", to raise income, to raise taxes, to raise bank turnover, and to raise credit card repayment records. The fundamental purpose of going to work is to raise taxes, get loans and buy investment properties. Otherwise, what fun and success is there in going to work? Which company can guarantee your retirement? Except for houses in first-tier cities, there are no assets that can outrun inflation and afford the burden of retirement. China, Canada, and the whole world have entered the information age, and social security and corporate annuities in the industrial age have become increasingly unreliable.
Mortgage is a type of financial leverage, and the size of the leverage approved by the bank depends on the applicant's income, which is taxable income. If you want to pay less taxes, the correct order is: 1. Pay more taxes; 2. Get high leverage; 3. Buy investment properties and use the gross rental income to get a lot of tax benefits, and pay less taxes openly and openly. If you think about paying less taxes every day, not only will your current life be miserable, but you will also be unable to see the poetry and distance of the future. At the fork in the road of wealth, if you choose the winding path, how can you run away? The path of life, investment, and wealth are all the result of choices. When it comes to filing taxes, remember not to listen to the advice of low-income friends. The reason they are poor is because they made mistakes in filing taxes. In Canada, there is no such thing as unrecognized talent. People who are neither stupid nor stupid, as long as they work hard, have a low income. It makes no sense to live awkwardly, cannot apply for a mortgage, and cannot accumulate wealth. The problem lies in not understanding the principle of tax filing - pay taxes first before you can get a loan, and the cost of loan investment can be tax deducted. It’s the same in the U.S. and Canada: As long as the money borrowed is used for investment, the interest on the loan is tax deductible. The pain of paying taxes can be compensated by the joy of taking out a loan.
There is a serious conflict between tax incentives and the ability to borrow mortgages in many aspects. It happens every day that one misstep leads to eternal regret. For example, if you still have a home loan of 200,000 yuan, and you withdraw 400,000 yuan through an additional mortgage, the total amount of the home loan becomes 600,000 yuan. If the 400,000 yuan you take out is used for investment, the interest can be used for tax deduction. It will be difficult to apply for an investment house in the future, because the self-housing debt is a "bad debt." This is a typical case of picking up small sesame seeds in taxation and losing big watermelons in investment. For another example, it is okay to accrue depreciation for an investment property, but depreciation will reduce the net rental income. When applying for the next loan, the bank will have less net rental income available to offset the investment property debt, thus reducing the borrowing capacity. Real estate investment is a financial investment behavior. You use your down payment + the bank's leverage to buy assets that can be profitable in the future. The sacrifice is today's down payment, delaying the satisfaction brought by today's consumption, and building a passive income asset package for the future. Partner with a bank to make future investments. The bank only charges interest and does not distribute dividends. Therefore, the bank is the best partner in any business. The essence of financial behavior is to use intertemporal value exchange to hedge risks. Any tax-saving behavior that affects cooperation with banks and reduces financial leverage is a waste of watermelon and sesame seeds. I did some calculations and found that there are at least 10+ tax-saving behaviors that hinder real estate investment. It is easy for everyone to fall into the tax-saving trap.
There are many things for which there is no solution. If you take a step back and think about it, there may be a solution. Fisher said that the impatience of human nature leads to the current hesitation. Think about poetry and the distance. Many problems can be solved and solved happily. Real estate investment is equivalent to running a small business. The government provides strong support in taxation and is openly encouraged. It is the best choice for working class, middle class, and self-employed people to accumulate personal assets and form a passive income stream. Pay taxes happily and get it back 10 times through bank leverage. The tax deduction is legitimate. The bank only charges interest and does not participate in dividends. 10 investment houses are 10 small businesses and 10 income after sleep. Imagine such poetry and the distance, it is simply beautiful. A journey of a thousand miles begins with a single step. I can think of the most romantic thing: getting the most loans and paying the least taxes, starting from our lecture.