tax deductable mortgage in Canada Red Frog Program Richard Rochard, Glen Kelleway, Fred Snyder Importance of a Written Plan
I have just refinanced my house and withdrawn some equity. I planned to use some of the equity to pay off a line of credit. I now realise (thanks to you) that I could make the additional amount that I have put on my mortgage tax deductable - if I play my cards right.
I have a rental property the rental income from which I now plan to use to pay off the line of credit. The equity that I recieved from the refiance I plan to use to pay the mortgage on the rental property. If my understanding is correct this would make that portion of the refiance tax deductable.
The only problem is that it will take me many months to pay off the line of credit as my rental income is not that high. I am paying non tax deductable interest on the line of credit while I have the money (from the house equity) to pay it off in full sitting in a savings account earning a poultry amount of interest.
My question is "can I put the equity into the line of credit and use the line of credit only on mortgage and other expenses for the rental property and still claim that the refianace is tax deductable? Or would the refiance be considered to be used to pay off a personal debt (thereforenot tax deductable) and the paper trail end there?"
If I could do this it would allow me to "save" my rental income while keeping my interest payments at a minimum. If I can do this would be able to also be able to "save" my rental income in the line of credit, therefore keeping it always paid off? eg. $1000 out of the line of credit to make the mortgage payment, $1000 into the line of credit from the rental income to bring the balance back to $0.
Thanks for your help
david ingram replies:
Note. Although this is aimed at Canadians making their mortgage interest deductible, it also applies to American residents who wish to make the mortgage interest deductible when they have borrowed more than the original purchase price of their residene.
To Your Question.
Your last paragraph does not work although in general your concept is correct. You should go to www.centa.com and read the November 2001 newsletter on the subject.
Take any cash you have and pay down any non-deductible interest. Establish a second line of credit that is used solely to pay for expenses on the rental. this line of credit will increase every month and may end up being equal to your present mortgage which is not deduuctible.
The advantage is that the interest on the new line of credit is now deductible.
Take your rent and pay off your non-deductible loans. It will take a while (maybe five or six or seven or eight years) but you CAN make the mortgage interest deductible. In the meantime, evry year your tax bill will be decrease because the deductible portion of the mortgage increases.
To do this, you need a mortgage person who understands the process.
* Richard Rochard, the manager of the Greater Vancouver Community Credit Union at 25th and Cambie understands it and his assistant Nick Wong also understands the process. Call (604) 876-7101 to talk to them.
* A Good Mortgage Broker can also help. Few understand the process and I can prove it. If they did, everyone who dealt with a mortgage broker would have a tax deductible mortgage. Glen Kelleway understands the system as well and I am always glad to help him with the concept if something is just a little different. His phone number is (604) 836-7242 or (604) 476-0053
* The Envision Credit Union has the Red Frog program which works well. Call assistant manager Rob Watkins at the Lougheed Highway branch (604) 539-5903
* I will do an individual consultation with you to explain in detail, I charge $450.00 for that consultation which lasts from 30 minutes to an hour and can be done by phone or in person.
Last but not least. This is an ideal question to ask Fred Snyder on his weekly radio programs on CISL and CKNW
However, you are also in luck - Fred Snyder (www.mutualfund101.com) will be my guest at 6 PM on Wednesday July 8, 2009 at 6 PM on/at www.david-ingram.com. Fred and I are going to talk about Mortgage Interest as a deduction and the importance of having a written financial plan and how to get a free one. You can call free of charge from anywhere in North America to 1-866-980-0499. If not in North america or in the lower mainland, call (604) 980-0321.
And, you can talk to Fred every Sunday and Fred and I tomorrow (Sunday July 5, 2009) as Follows:
Every Thursday at 12 noon and 7 PM, Fred Snyder of Dundee Wealth Management
presents free Financial Seminars for his clients, potential clients and anyone who phones and asks to attend. Note that the seminars are suspended for July and August 2009 and will resume in September 2009.
THERE is NO CHARGE! (I used to charge up to $999.00 for essentially the same thing)
AND - NO ONE'S ARM IS TWISTED TO BUY SOMETHING.
They are presented at the Dundee Boardroom (holds about 30 people max)
1764 West 7th
Vancouver, BC
phone (604) 731-8900 - ask for Freda to register for free.
These are genuine educational seminars dealing with everything from how to buy a house to making your mortgage tax deductible to buying an RRSP to alternatives to RRSP accounts to estate planning. So what started as 13 separate seminars has now evolved into 23 separate topics.
IT IS NOT UNUSUAL FOR PEOPLE TO COME TO ALL OF THEM.
ONE LADY CAME TO 53 separate seminars and her husband came to about 20 with her.
If you have a financial consultant, bring them. People have brought their bankers and life insurance agents with them.
Take your spouse, your best friend, your son, your daughter, your mother or your worst enemy But do phone 604-731-8900
Fred Snyder also is the host of ITS YOUR MONEY every Sunday morning on CISL (650 on AM dial) from 9:00 to 10:30. This is a phone in financial show which I appear as a guest on the first Sunday of every month. You can listen to the program live around the world every Sunday morning on/at www.am650radio.com. We have taken calls from around the world. In one case, a lady phoned from Florida, got her answer and then asked if I was the David ingram she knew in Regina back in 1959. Small world as they say.
Call (604) 280-0650 with your question on Sunday Morning from 9 AM to 10:30.
And as of July 20, 2008, IT'S YOUR MONEY also appears in a different version LIVE on CKNW from 5 PM to 6 PM as a phone in show to answer your questions. Call (604) 280-9898 or 1-877-399-9898 or *9898 on your cell to get your question on the air. I am a guest on the first Sunday of each month as above. Try July 5, August 2 (same day as the Gay Pride Parade which I am also in), Sept 6, October 4, November 1 and December 6, 2009.
Callers to the show are awarded a free written financial plan for the future - be prepared to spend a couple of hours on this. This written financial plan also includes what happens if an dwhen mortgage interest is deductible.
As an aside, I do not do them any more but used to charge up to $3,000 for essentially the same thing in the days before the wonderful computer programs available today to assist.
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