With the ever changing landscape for secured finances (leverage against real estate) it’s impossible for the average person to keep all the policies straight between all the chartered banks, credit unions and the security back mono-line lenders. The one sector of borrowers that are finding it harder and harder to place their mortgages are business for self people stating their income or using their equity. More and more individuals are turning to alternative (or B) lenders to get their financing done. The only thing stopping all these people from jumping into the ‘B’ pool without hesitation is the rate. At first it looks daunting with a difference of up to 1.50 basis points, but the number prove that it’s the exact opposite. I often hear, “But I am a long time business owner with great credit and great assets…I want the best rate!”
What if paying a higher interest rate meant saving thousands on your income tax? Would you be proud to share that information around the water cooler? Here are the basic numbers…
Tax Rate vs Interest Rate
|
Income Claimed |
Taxes Paid to Government |
|
$100,000 per yr (salaried) |
$25,060 per yr |
|
$20,000 per yr (* BFS) |
$1,761 per yr |
* Business For Self
|
Loan Type |
‘A’ |
‘B’ |
|
Mortgage * |
$350,000 |
$350,000 |
|
Rate |
2.99% |
4.35% |
|
Term |
1 yr |
1 yr |
|
Amortization |
25 yrs |
25 yrs |
|
Interest per Term |
$10,271 |
$14,933 |
*Average BC mortgage
** For ease of comparison to BC yearly tax rate of 1 year term has been used. Rates are approximations for example purposes.
The Savings
$23,299 income tax savings
– $4,662 more interest charged on ‘B’ or alternative mortgages
$18,637 net savings
The flexibility of being self employed comes with its many pros, paying a slightly higher interest rate is not a con. You should be taking every opportunity to tell other BFS colleagues and friends that you saved $18,637.
For more information about my exclusive lender for Business For Self income earners contact me.