(December 13 – 12:20 ET) – Bank of Nova Scotia has introduced the Scotia Investment Line of Credit, a personal line of credit for investing in non-registered Scotiabank mutual funds.

“Borrowing to invest can be a good complement to your other investment strategies,” explains Alberta Cefis, Scotiabank’s senior vice president of retail lending.

The Scotiabank Investment Line of Credit is secured with Scotia Mutual Funds held by the investor. The interest rate is prime +1%, and may be tax deducible. A minimum credit limit is $5,000 and a maximum credit is $500,000.

“If you are saving and investing a fixed amount of money each month, it could take several years to accumulate a significant sum. However, if you borrow to invest and use your regular monthly saving amount to pay the line of credit, you can start earning interest, dividends and capital gains on the entire sum immediately,” said Cefis. “And you may get a tax deduction on the loan interest you pay.”

The bank notes that the new line of credit is designed for investors who are comfortable with the strategy of leveraged investing to optimize the growth of their mutual fund portfolio. “It’s not for everyone. The investor needs to be comfortable with market volatility and have a good understanding of the market and how margins and leveraging work,” said Cefis.

One of the innovative features of the Scotia Investment Line of Credit is that Scotiabank will automatically monitor the Loan to Value (LTV) ratio of your account. If the ratio exceeds certain pre-determined thresholds, a customer service representative will contact the investor to discuss the range of options available to immediately reduce the LTV ratio.
-IE Staff