Using Money to Make Money

As I'm planning to have a family soon, I've been contemplating for the past few months how I can work less and make more. It's not greed. I just want to be able to make free time so I can be with my children in their formative years. I've oft heard of how one should use money to make money but was never sure how to go about doing that - until recently.

So this is the beginning of a work-in-progress plan that my wife and I have on using our money to make money. I'll try to update on our progress as you may be able to benefit from our experience.

To provide context, this plan would work in Canada, and likely Australia, and perhaps other Commonwealth countries with similar taxation and real estate laws. We have about 15 years left on a mortgage on our home that has increased in value over the past few years.

The basic plan is to leverage the equity in our home for downpayment. Then extend the amortization on our mortgage to enable us to borrow more while keeping our regular payments the same. That combination will be used to buy an investment property which we intend to rent.

We are now at the first part of our plan. Securing financing. We approached a mortgage broker to secure financing under these assumptions:

• our regular mortgage payments (P&I) should remain the same
• only our amortization period is extended to the maximum allowable

What we need to find out is:

• how much of our equity can we use for downpayment on the investment property
• how much can we borrow maximum

With this information, we know the upper limit of what we can afford. Once we get financing approved, we can start hunting for an investment property. Stay tuned for what happens next.