Borrowing To Invest
Use this event when you transfer borrowed funds from your credit account to your brokerage account with the intention of investing.
When to Use
Record this event when you advance money from your HELOC or line of credit and deposit it into your brokerage account. This is the first step in leveraged investing—getting borrowed funds into position for purchasing securities.
If the money passes through a chequing account on the way, that's fine. The app only needs to know when it left your credit account and when it arrived in your brokerage.
What You Enter
Amount — The total amount being transferred. This is the amount withdrawn from your credit account and deposited to your brokerage.
Credit withdrawal date — The date the funds left your credit account. This is when the borrowing occurred and when your credit balance increased.
Brokerage deposit date — The date the funds arrived in your brokerage account. This is when the cash becomes available for investing.
The credit withdrawal date must be on or before the brokerage deposit date. If you withdraw on Monday and the transfer settles on Wednesday, use Monday for the withdrawal and Wednesday for the deposit.
What Happens
When you record this event, your balances change as follows:
Credit Account
Your credit balance increases by the borrowed amount. Specifically:
- Uninvested Principal increases by the full amount
This is classified as "uninvested" because the money hasn't been used to purchase securities yet. It's borrowed and in your brokerage, but sitting as cash.
Brokerage Account
Your available cash increases:
- Borrowed Cash increases by the full amount
- Total Brokerage Cash increases by the full amount
Borrowed cash and uninvested principal are always equal—they're the same money viewed from different perspectives. Borrowed cash is what you see in your brokerage; uninvested principal is how it's classified on your credit account.
Interest Implications
Interest on uninvested principal is in a gray area. The CRA allows deduction of interest on money borrowed for investment purposes, and having the money in your brokerage with intent to invest generally qualifies. However, if the money sits uninvested for an extended period, the deductibility becomes questionable.
The app tracks uninvested principal separately so you can see exactly how much borrowed money is awaiting deployment. For tax purposes, you may choose to claim interest on this portion if you're actively investing, or exclude it to be conservative.
Example
You have a HELOC with no current balance. You want to invest $10,000 in ETFs.
Event: Borrowing To Invest
- Amount: $10,000
- Credit withdrawal date: January 15
- Brokerage deposit date: January 17
Before:
- Uninvested Principal: $0
- Borrowed Cash: $0
After:
- Uninvested Principal: $10,000
- Borrowed Cash: $10,000
Your credit account now shows $10,000 owing. Your brokerage shows $10,000 in cash, all of it borrowed. The next step would be to use this cash to purchase securities, which would move it from "uninvested" to "invested" principal.
Common Questions
What if I borrow more than I end up investing? That's normal. If you borrow $10,000 but only spend $9,500 on securities, the remaining $500 stays as uninvested principal. Interest on that $500 is still tracked, though its deductibility depends on your plans to invest it.
Can I make multiple borrows? Yes. Each time you transfer borrowed funds to your brokerage, record a separate event. The uninvested principal accumulates until you use it to buy securities.
What if I use the money for something other than investing? If you withdraw borrowed cash from your brokerage for personal use, record a "Brokerage Cash Withdrawal" event. That will reclassify the borrowed amount from uninvested principal to personal-use principal, and interest on it will no longer be deductible.
CRA Basis
The deductibility of interest on borrowed funds used for investing is established in Income Tax Folio S3-F6-C1, which states that interest is deductible when borrowed money is used for the purpose of earning income from business or property.
The key requirement is that the borrowed funds must be traceable to an income-earning use. By recording when you borrow and when you invest, this app maintains that traceability.
Related Events
Investment Purchase — After borrowing, use this event to purchase securities with the borrowed cash.
Borrowing For Personal Use — If you're borrowing for non-investment purposes, use this event instead.
Brokerage Cash Withdrawal — If you later decide to withdraw borrowed cash for personal use.