Let’s look at borrowing $100,000 on your home to invest. If you borrowed at 8 percent, you would pay $8,000 in interest, and if you invested the $100,000 you borrowed on your home and made 12 percent, you would make $12,000 in return, netting you $4,000. Or would you? Where I live, if you make $12,000 on an investment, you will pay taxes. If you are in a 30 percent bracket, you will pay $3,600 in taxes at ordinary income rates or $2,400 if you invest at capital gains rates. So you will not net $4,000, but instead $400 to $1,600. But we aren’t through yet.
