- quote -

It's not deductible because mortgages in Canada are not tax deductible.
Only loans taken for investment purposes are given a tax break.
Canada also does not have the creative financing available in the US.
IINM, they just introduced interest only loans recently to the average
consumer, which were only available in the past to corporate clients,
but you have to have a very high credit rating to qualify. Canada
does not have negative amort loans, nor do we pay points to buy down
interest rates.

In terms of qualifying for an interest only loan, Canada does not use
FICO scores, instead, each creditor rates according to levels R1-R9 for
revolving accounts like credit cards, I1-I9 for loans - 1 being the
best, 9 being absolute worst.

The OP is right to be careful because the 2% fixed loan could be an
intro rate where it changes after a period of time. If he uses the
loan to pay off the mortgage loan, which is tax deductible because it
is for rental property/investment, then as I understand from his post,
the 2% fixed loan is not for investment purposes, but to pay off the
investment loan, therefore, no tax break.

Another major difference is interest rates do not vary by province like
they do by State in the US. Every Thursday, the Bank of Canada sets
the Prime Lending Rate (that may have changed) and all prime and
mortgage rates are published online and in newspapers. When I shopped
for loans and mortgages at home, I took the newspaper, checked the
various banks for their rates in order to pit lenders against each
other. So, someone in Alberta will get the same rate as someone in
Quebec.

Mostly Harmless wrote:

- quote -

I don't mean to be a pessimist, but under what circumstances can one get
a 2% fixed loan? And why isn't it deductible? If it's a bank loan be
careful it's not a negative amortizing loan, and if you don't know what
that means and implies, ask, and research.
JOE
JoeTaxpayer.com

Mostly Harmless wrote:

- quote -

It looks like you'd need to be in a 77%+ marginal tax bracket for the 2%
loan not to be a winner, based only on what you've said above. Always,
always, always check my math.

So long, and thanks for all the fish,
-Will

Hello there,

I have been watching this group for a while and it appears to be great.
I have then decided to start being active in it - not only from the
"asking" side but also from the "answering" side.

Question for a kick-off: Assume I have a mortgage which charges me
%5.25 interest annually, out of which %80 is tax-deductible (I live in
Canada; unlike the USA, mortgage interest isn't tax-deductible here,
however I rent-out a big portion of my property).

Suppose I have the possibility of getting a significant loan for a much
lower rate (about %2).

Would it make sense to take that chunk of money, put it as a lump-sum
on my mortgage, and then pay-off the other loan? In essence, interest
payment to the mortgagor would significantly decrease.

At first glance it seems ideal. However, the %2 loan isn't tax
deductible at all. I'm not sure if it matters, and I haven't got around
yet to figure out the mathematics of it all. I was wondering whether
any of you has been presented with such a possibility before.

Ideas?


Isaac