Swapping variable interest to fixed interest rate through options

[beerbaron]

Hi, I have to buy half of my house from my ex-wife and instead of getting a fixed 5Y mortgage at 5.5% I tough it might be better to margin stocks (about 15% LTV) and use the cash proceed to buy the house. As additional insurance I would probably want to do interest rate swap so that I "convert" my variable to Fixed  (4 to 5Y). I'm Canadian so this would have the advantage that the interest and hedges would be tax deductible.

 

What are the retail instruments that I could use to do a dirty interest rate swap?

 

Thanks

BeerBaron

[bizaro86]

9 minutes ago, beerbaron said:

Hi, I have to buy half of my house from my ex-wife and instead of getting a fixed 5Y mortgage at 5.5% I tough it might be better to margin stocks (about 15% LTV) and use the cash proceed to buy the house. As additional insurance I would probably want to do interest rate swap so that I "convert" my variable to Fixed  (4 to 5Y). I'm Canadian so this would have the advantage that the interest and hedges would be tax deductible.

 

What are the retail instruments that I could use to do a dirty interest rate swap?

 

Thanks

BeerBaron

 

Not a/your tax advisor, but the method of borrowing the money doesn't determine the tax deductibility of the debt in Canada, rather what you use the proceeds for determines whether the interest is deductible.

 

If you borrow money against your stocks to buy a house that isn't tax deductible. Could always do Smith maneuver...

[beerbaron]

Please expand on the Smith maneuver...

 

BeerBaron

[LC]

https://www.investopedia.com/terms/s/smith-maneuver.asp#:~:text=Key Takeaways-,The Smith Maneuver is a legal tax strategy that effectively,tax-deductible investment loan interest.