Investment Loan Calculator (Canadian)
Investment Loan Calculator (Canadian) Definitions
- Loan amount
- This is the total loan amount you are planning on taking out. This amount is also used as the initial value of the appreciable asset or investment that you are making.
- Loan term in years
- The number of years you wish to analyze for this loan. This can be any number from one to 30 years.
- Loan interest rate
- The annual interest rate you are charged for this loan. This calculator assumes that your payments are made monthly and that interest is compounded monthly.
- Starting investment value
- The starting value of your investment. This may be higher than your loan amount if you either had an immediate gain or invested outside money (not received from the loan). This could be lower than your loan amount if not all of your loan value went directly into your investment. For example, if you had fees associated with the investment, or if you paid more than you could immediately receive on a sale of the investment.
- Investment rate of return
- This is the annually compounded rate of return you expect from your investments. For the purposes of this calculator, taxation is not factored into the results. If you pay taxes on the interest, dividends or capital gains from these investments you may wish to enter your after-tax rate of return.
The actual rate of return is largely dependent on the type of investments you select. For example, the annual return of the S&P/TSX Composite Index for the 10 year period from December 31, 2009 through December 31, 2019 was 3.9% (source spindices.com). Over the same period the total annual return (including dividends) was 6.9% (source spindices.com). Savings accounts at a bank or credit union may pay as little as 2% or less. It is important to remember that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment.
- Percent reinvested
- This is the percentage of the return generated by your investment that is reinvested. For example, if your investment generates $1,000 per month and you reinvest 50%, the value of your investment will increase by $500.