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Dear David,
I'm on the mailing list of jurock.com, and I found your section to be
quite useful. I have a question and I would appreciate your comments.
If I reside in Canada and buy a house to live in (as a permanent
resident in Canada), but will continue to carry a mortgage overseas
(the mortgage is with an overseas bank), will that overseas mortgage be
deductible in Canada? Or more precisely, whether interest on that
mortgage will be deductible in Canada or not? Please note that the
essence of the situation is that it is not deductible in Australia where
the mortgage is paid off (it's been our principal residence).
Effectively, what will happen is that my home residence will be in
Canada, but an investment property (a house, on which I will continue to
carry my mortgage) will be overseas. Is there any problem with the
scheme described above? If it's not deductible under the scheme I have
described, please advise how to make it deductible.
Many thanks,
RXXX
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david ingram replies:
This question came back to back with the previous question from England. Both have the same premise. They want to borrow money on the paid for house in the old country and use the money to buy a house in Canada and use the mortgage on the house in the old country as a deduction against rental income from the old house.
The answer is essentially the same as the prior question. The best that one can do is half one spouse borrow the money to buy the other spouse out of what is now the rental house.
That money can now be taken and used as a down payment on the Canadian House.
If one then sets up a pair of mortgages so that a mortgage or line of credit is increasing on either house with all money for rental expenses borrowed. In other words, you take the rent from the rental house and pay down the non-deductible mortgage in Canada. Then when you need money for the rental house to pay the taxes, fix the roof and even make the payments on the deductible mortgage, you borrow the money.
It does not take long to change non-deductible interest to deductible interest.
Again, go to www.centa.com and read the November 2001 newsletter for more hints.
Hope this helps, ingram
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