Tax deductible mortgage has been very popular recently. This product, however, has actually been around a while. Here is a brief explanation of how you can make your mortgage tax deductible – while doing the same thing and paying the same mortgage amount each month.
If you are up for renewal and you are currently paying “some” tax to Revenue of Canada, this product maybe suitable for you. As you may understand, your monthly mortgage payment consists of principle and interest. The interest pays the lender, the principle pays down the mortgage over the 25 years (or up to 35 years).
The difference is, with a special arrangement called “combination mortgage”, the interest still pays to the lender; however, your principle payment will be automatically available in a separate Line of Credit (LOC) account. When the money in the LOC is designated for “investment purpose” only, the interest on the LOC is tax deductible.
Therefore, you will have extra “expenses” to file during that tax year, and therefore, you will have extra tax return (or have reduced taxable income).
If you use the investment earning to pay extra payment into your regular mortgage, you will generate a new portion of money in the LOC. And therefore, you will accumulate even more money available for investment and incur more interest that is tax deductible.
Contact us if you are interested in learning more. The product is not for everybody, but when it is used wisely, you can live mortgage free twice as fast.
Filed under: Tax Deductible Mortgage
