How the recent federal government’s announcements might impact you

The federal government made several announcements claiming it will improve access to the housing market for first-time buyers.

The announcements include:

• Increasing the maximum amortization period to 30 years from 25 for first-time buyers purchasing a new-build property with a down payment of less than 20%, otherwise known as a default-insured mortgage. This change will take effect August 1 of this year, although the government hasn’t specified if this applies to the date of the mortgage application or the funding date.
• Increasing the Home Buyers’ Plan limit to $60,000 from $35,000. This federal program allows first-time homebuyers to withdraw funds from their Registered Retirement Savings Plan (RRSP) tax-free as long as they are used towards the purchase of their first home and are repaid within the subsequent 15 years. This change will take effect April 16, 2024, the day of the federal budget.
• First-time homebuyers who withdraw from their Home Buyers’ Plan between January 1, 2022 and December 31, 2025 will see their repayment grace period extended by three years. These buyers will now have a grace period of up to five years before they are required to start making repayments. Under the current rules of the Home Buyers’ Plan, first-time homebuyers are required to start repaying the withdrawn amount back into their RRSPs within two years after the end of the year in which they withdrew the funds. However, the proposed change extends this repayment grace period by an additional three years.
• Changes to the Canadian Mortgage Charter that allow for permanent amortization relief for qualifying existing homeowners. While there are few details about this change, the government says this relief will be made available to “at-risk” existing homeowners who meet specific eligibility criteria. You can read the full release from the federal government here.

While there are some concerns about the increased amortization limit being restricted to new builds, this change will help those first-time buyers qualify for a mortgage. Having the option of a longer amortization period means they can benefit from lower monthly mortgage payments, in turn resulting in greater flexibility and reduced financial strain.

These measures are part of the federal government’s just-released strategy to help address the country’s housing affordability crisis. Its plan, Solving the housing crisis: Canada’s Housing Plan, will be tabled in this week’s budget and includes a list of new promises and measures, including a plan to unlock 3.87 million new homes by 2031.

I understand that keeping up with the ever-changing landscape of mortgage rules and regulations can feel daunting. However, I’m here to simplify the process for you.

If you’re considering taking advantage of these opportunities or have any questions about how any of these changes may affect you, please don’t hesitate to reach out.

As the April tax deadline approaches, understanding the plethora of tax credits available can be a game-changer for homeowners and first-time buyers. 

Whether you’re stepping into your first home or you’re a seasoned homeowner, being aware of these deductions and programs can significantly impact your tax filings and maximize your return this season. 

GST/HST new housing rebate

• What is it? Recoup a portion of the GST or the federal part of the HST paid for new or renovated homes.
•  Eligibility: Buyers of new homes, constructors of homes, or individuals who have majorly renovated their primary residence.
• Qualifying homes: New or substantially renovated primary residences.
•  Claim process: Submit your claim within two years after the purchase or completion of renovations.

First-Time Home Buyers’ Tax Credit (HBTC)

• What is it? A $10,000 non-refundable tax credit for eligible first-time home buyers, offering up to $1,500 in tax relief.
• Eligibility: First-time homebuyers or those who haven’t owned a home in the previous four years, including the buyer’s spouse or common-law partner.
• Qualifying homes: Primary residences in Canada.
• Claim process: Claimed in the tax year when the home is purchased, on line 31270 of your tax return.

 Home Accessibility Tax Credit (HATC)

• What is it? Offers a 15% non-refundable tax credit on up to $10,000 of eligible home renovation expenses, for a maximum of $1,500 in tax relief per year.
•  Eligibility: Homeowners making accessibility-related renovations to accommodate seniors or individuals with disabilities.
• Qualifying renovations: Changes made to improve accessibility or help a senior or a person with a disability be more functional or mobile at home.
• Claim process: Claimed in the tax year when the expenses were incurred.

Multigenerational home renovation tax credit

• What is it? Provides up to $7,500 in tax relief for eligible renovations to accommodate a senior family member or an adult with a disability.
•  Eligibility: Homeowners undertaking renovations to create a secondary dwelling for a senior or a person with a disability.
•  Qualifying renovations: Renovations that enable the senior or adult with a disability to live with a relative in a secondary dwelling.
• Claim process: Available for expenses incurred after the tax year it was introduced.

Rental income deductions

• What is it? Allows landlords to deduct expenses related to generating rental income, including mortgage interest and property taxes.
• Eligibility: Property owners who earn rental income from residential or commercial properties.
•  Qualifying expenses: Mortgage interest, property taxes, maintenance costs, utilities, and insurance.
• Claim process: Expenses are deducted in the tax year they are incurred.

Note this list isn’t exhaustive, and specific provinces may offer additional deductions and credits not covered here.

Notice on Canada’s Underused Housing Tax (UHT)

Effective since 2022, Canada’s UHT imposes a 1% tax on underused foreign-owned properties, though it also has tax filing implications for those with rental units, or with properties held in partnerships or bare trust agreements, in order to claim exemptions. Anyone impacted by this tax is strongly encouraged to consult a tax professional to ensure adherence and avoid penalties.

If you have any questions about navigating these tax credits, please don’t hesitate to reach out. 

Should you need more detailed tax advice, I’d be happy to refer you to a certified tax professional who can provide you with personalized guidance and inform you of other programs that may apply to your situation. Let’s make sure you’re getting the most out of your home-related tax opportunities this season!

Call me today!  

Barb Eglauer
Mortgage Agent
(780) 720-5185
barb.eglauer@mortgagegroup.com

I think it’s safe to say we’re all eagerly anticipating the arrival of spring as the snow melts and the days grow longer. 

It’s a season of renewal, not just for nature but also for the real estate market as both homebuyers and sellers come out of hibernation and prepare to make their next big move. 

If you plan to count yourself among one of these groups—or maybe both—the following are some tips to help ensure a smooth and successful process as either a homebuyer or a home seller.

For homebuyers

1. Secure a mortgage pre-approval: Starting the home buying process with a mortgage pre-approval is crucial. It not only gives you a clear idea of the budget you have to work with, but also positions you as serious contender in the eyes of sellers and may protect you in the event rates start to rise. Gather your financial documents early and give me a call so I can help you fully understand your borrowing capacity.

2. Understand the market: Familiarize yourself with the local real estate market trends, including average home prices, inventory levels and the average time homes spend on the market. This knowledge can help inform your search and negotiation strategy and help set appropriate expectations. If you need a referral to an amazing realtor, I’m happy to connect with you with one.

3. Consider future needs: Think long-term about your housing needs. Factors like family planning, work-from-home requirements, and lifestyle should play into your decision-making process. Investing in a home that meets future needs can prevent costly moves down the line.

For home sellers

1. Get a mortgage pre-approval: As a seller, you should also secure a mortgage pre-approval. This step is vital for understanding how much you can afford in your next purchase and for making timely offers once your current home is sold.

2. Investigate mortgage porting: If you have an existing mortgage, understanding its portability is essential as porting a mortgage may offer financial benefits and ease the transition to a new property. As a broker, I can help you understand your current mortgage’s portability features and any applicable fees or conditions that may be involved. Additionally, if your mortgage is not portable or if it makes sense to break your existing mortgage term, I can provide the necessary information to help you decide the best timing of your sale.

3. Find a reliable Realtor partner: Choosing the right real estate agent is critical for a smooth sale. Look for agents with a strong track record in the local market, excellent negotiation skills, and a comprehensive marketing plan. A good agent can significantly impact the selling price and how quickly the property sells. I’d be happy to make an introduction for you. 

4. Prepare the home for sale: Prepare your home for the market by addressing repairs, decluttering, and possibly staging the property. A well-presented home can attract more buyers and lead to higher offers. Investing in professional photography can also showcase the property in its best light online, where most buyers start their search.

By following these steps, you’ll be in a position to navigate the spring real estate market with confidence. 

If you’re planning to buy or sell this coming spring season, don’t hesitate to reach out. I would be happy to go over additional tips that could help you as either a buyer or a seller. 

Call me today!  

Barb Eglauer
Mortgage Agent
(780) 720-5185
barb.eglauer@mortgagegroup.com

Going Green – Unveiling the Cost Savings of an Energy Efficient Home

Save money today, save the world tomorrow.

Ranked 15^th on the Green Future Index globally in 2002, and 2^nd best out of the worlds top 15 oil exporting countries, Canada is a global leader in ESG performance. In recent years, the Canadian housing market has witnessed a significant shift towards sustainability and energy efficiency. With the growing need to focus on renewable energy, while feeling the pinch of increasing energy costs for ALL households across the nation, initiatives such as Sagen Canada’s Energy Efficiency Program have gained prominence throughout Canada. In this blog post, we will show you that going green won’t just feed your soul but also help feed your family.

Understanding the Program

The SAGEN Energy Efficiency Program is designed to incentivize homeowners to invest in energy-efficient improvements for their properties. By offering mortgage loan insurance premium refunds to those who purchase, build, or renovate their homes to make them more energy efficient, the program aims to promote sustainable housing practices while reducing the financial burden on homeowners.

Cost Comparison and Potential Savings

Let’s consider the cost savings of the SAGEN Energy Efficiency Program by comparing scenarios with and without the program, based on 95% financing on a $400,000, $600,000, and $800,000 purchase price with and effective interest rate of 5%.

$400,000 Without the Energy Rebate:

Purchase Price: $400,000, Down Payment: $20,000, Net Mortgage of $380,000, Sagen insurance fee of $15,200, leaving us with a total mortgage of $395,200

Monthly Payment: $2,298.50

Total payments over 25 years: $689,550

$400,000 With the Energy Rebate:

(Assuming a 25% refund on mortgage loan insurance)

Purchase Price: $400,000, Down Payment: $20,000, Net Mortgage of $380,000, Sagen insurance fee of $11,400, leaving us with a total mortgage of $391,400

Monthly Payment: $2,276.40

Total payments over 25 years: $682,920.57

Total savings with SAGEN Energy Efficiency Program: $6,629.43

$600,000 Without the Energy Rebate:

Purchase Price: $600,000, Down Payment: $35,000, Net Mortgage of $565,000, Sagen insurance fee of $22,600, leaving us with a total mortgage of $587,600

Monthly Payment: $3,417.51

Total payments over 25 years: $1,025,253.27

$600,000 With the Energy Rebate:

(Assuming a 25% refund on mortgage loan insurance)

Purchase Price: $600,000, Down Payment: $35,000, Net Mortgage of $565,000, Sagen insurance fee of $16,950, leaving us with a total mortgage of $581,950.

Monthly Payment: $3,384.65

Total payments over 25 years: $1,015,395.06

Total savings with SAGEN Energy Efficiency Program: $9,858.21

$800,000 Without the Energy Rebate:

Purchase Price: $800,000, Down Payment: $55,000, Net Mortgage of $745,000, Sagen insurance fee of $29,800, leaving us with a total mortgage of $774,800

Monthly Payment: $4,506.28

Total payments over 25 years: $1,351,882.63

$800,000 With the Energy Rebate:

(Assuming a 25% refund on mortgage loan insurance)

Purchase Price: $800,000, Down Payment: $55,000, Net Mortgage of $745,000, Sagen insurance fee of $22,350, leaving us with a total mortgage of $767,350

Monthly Payment: $4,462.95

Total payments over 25 years: $1,338,883.76

Total savings with SAGEN Energy Efficiency Program: $12,998.87

The above outline clearly shows that this program will benefit both your monthly mortgage commitments as well as reduced energy costs that come from having an environmentally responsible home. You can help yourself now and help benefit future generations by simply doing what is right the next time you buy your build a home.

Reach out to your Advanced Mortgage Professional today and let us help you make cents of your mortgage.

 Discover the Green Advantage – A Knowledge Share with @AdvancedMortgage! 

Excited to team up with @AdvancedMortgage for a special insight into how sustainability meets savings in homeownership! Did you know making your home energy-efficient benefits both the planet and your pocket?  In Canada’s commitment to sustainability, initiatives like SAGEN Energy Efficiency Program are creating waves, offering homeowners a chance to save big. Let’s dive into our collaborative knowledge share:

Understanding the Program: @AdvancedMortgage and I are here to walk you through the details of SAGEN’s initiative, encouraging homeowners to invest in energy-efficient upgrades. It’s a win-win – sustainable homes and financial relief for homeowners. 

Cost Comparison and Potential Savings: In collaboration with @AdvancedMortgage, let’s explore the potential savings with the SAGEN Energy Efficiency Program:

 $400,000 Home Purchase:

• Without Rebate: Total payments over 25 years – $689,550
• With Rebate: Total payments over 25 years – $682,920.57
•  Total Savings: $6,629.43

 $600,000 Home Purchase:

• Without Rebate: Total payments over 25 years – $1,025,253.27
• With Rebate: Total payments over 25 years – $1,015,395.06
•  Total Savings: $9,858.21

 $800,000 Home Purchase:

• Without Rebate: Total payments over 25 years – $1,351,882.63
• With Rebate: Total payments over 25 years – $1,338,883.76
•  Total Savings: $12,998.87

Our collaborative knowledge showcases that with SAGEN’s program, you not only ease your monthly mortgage commitments but also enjoy reduced energy costs in your eco-friendly haven. 

Curious about the green revolution in homeownership? Let’s learn together! DM me directly for more information on this green initiative! Let’s make your mortgage and home buying journey both eco-conscious and financially savvy.

Mortgage lenders will use your credit score to help them decide whether to approve you for the home you want. The better the score, the greater the chance you’ll get the mortgage you’re looking for, and potentially at a lower interest rate. Your credit score is not the entire story. Mortgage lenders will consider more than just your score when underwriting your file. Some additional factors include your employment status/length, income, and savings/assets. So, how can you improve your credit score?

There are many different credit scores a lender can consider. The most common in Canada are provided by the two major credit reporting agencies — Equifax and TransUnion. In addition to that, some lenders have unique custom scores that only exist on their internal systems.

If your score isn’t where you’d like it to be, there are some things you can do to help bring it up.

1. Check your credit report!

When looking to improve your credit scores, a good first step is to review your credit reports from both nationwide credit reporting agencies — Equifax and TransUnion. After making sure there are no accounts you don’t recognize, or signs of identity theft or fraud, check to see if you have any unpaid balances or past-due accounts that have gone to collections. It’s a good idea to tackle this negative information first by paying off as many outstanding debts as you can. Remember that although it’s important to pay any accounts in collections, they will remain on your credit bureau for a period of six years from the time they went into collections.

2. Always pay your bills on time

One of the top things you can do to lift your credit score is to pay your bills on time. Payment history is a significant piece of what makes up the entire score, so it’s critical to avoid late payments. If you struggle with this, talk to your bank about setting up automatic payments or set calendar reminders to help you pay on time.

3. Don’t max-out your balances

Your credit utilization ratio is the amount of overall credit (limit) you have compared to the balance that is reported to the credit bureau. For example, if your credit limit is $10,000 and your reported monthly balance is usually about $3,000, then your credit utilization rate is 30 per cent. It’s best to keep your credit utilization rate at or below 30% when possible. If that’s not an option, then try to keep it under 75% if you can. You can do this by spending less on credit, making more frequent (more than once-a-month) payments, or asking your credit card company for a credit limit increase.

4. Limit new accounts

Applying for new credit accounts (especially non-mortgage accounts) will usually lead to a hard inquiry on your credit report. This can negatively affect credit scores for a short period of time, particularly if you’re at the lower end of the credit score spectrum. If increasing your score is your goal, try to limit how often you apply for new accounts. Opening a new credit card or loan account will also decrease the average age of accounts on your report, which is another factor used in calculating your credit scores.

5. Keep your accounts open

When trying to increase your score, avoid closing old accounts that have been paid off, even if you no longer use them. One of the factors in credit scores is “average age of accounts,” so keeping the accounts open can help maintain the length of your credit history.

When will my score increase?

The amount of time it takes to improve a credit score varies depending on your circumstances, but it will require a bit of patience and won’t happen right away. Some negative factors are easier to overcome than others.

It may take you less time to recover from one late payment or a few hard inquiries than from having an account go into collections. A consumer proposal or bankruptcy will take even longer to recover from. Just remember to keep at it! Improving your credit takes effort and time. There’s no one-size-fits-all solution that will change your credit score overnight. Every little bit counts!

Reach out to us today for a free assessment of your credit and personal financial situation. We can Guide you through the steps needed to get you approved for a mortgage!

Your Dream Home Awaits: A REALTOR®’s Guide to Credit Mastery!

Hello future homeowners!  As your dedicated REALTOR®, I’m thrilled to share some insider tips on navigating credit for that perfect home purchase, brought to you by @AdvancedMortgage.

1. Credit Health Check: Let’s kick off your journey with a comprehensive credit report check from Equifax and TransUnion. Together, we’ll ensure your credit is in top-notch shape—no surprises, no red flags. Your dream home deserves a clean slate! 

2. Timely Payments Matter: Paying your bills on time is crucial. We can explore options like automatic payments or set up handy calendar reminders to keep you on track and avoid those pesky late fees.

3. Smart Balancing Act: We’ll strategically manage your credit utilization – aiming for that sweet spot below 30%. Need some pro tips? Count on us for savvy solutions.

4. New Isn’t Always Better: Together, let’s navigate the impact of new credit accounts on your report. Too many inquiries can raise eyebrows. We’ll create a plan to maintain a smooth and steady course.

5. Age Before Beauty: Old accounts hold significant weight. Even if they’re paid off and quietly resting, we’ll keep them open to preserve that valuable “average age of accounts.”

Your Journey to Improvement: Patience is our ally. While improvement timelines may vary, every step counts. Let’s work hand in hand, shaping the path to your dream home!

Ready for a tailored credit assessment and seamless mortgage guidance? Reach out for a complimentary consultation today! Together, we’ll turn your homeownership dreams into reality.

Contact me for more information about why now is a great time to buy!https://robynmoser.com/

As was widely expected, the Bank of Canada has left its key lending rate unchanged at 5.00%.

This marks the Bank’s fifth straight rate hold since it last raised rates back in July.

In its statement, the Bank said it is “still concerned about risks to the outlook for inflation, particularly the persistence in underlying inflation.”

“Governing Council wants to see further and sustained easing in core inflation and continues to focus on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour,” it added. 

Read More: For a detailed view, access the Bank of Canada’s full statement.

What this means for your mortgage

• Variable-rate mortgages: No change in your rates, with the prime rate holding at 7.20% at most major lenders (excluding TD, which has a mortgage prime rate of 7.35%).
• Fixed-rate mortgages: Your mortgage term remains unaffected by this announcement.

Looking forward

We’re closely monitoring the landscape as we approach anticipated rate cuts by the Bank in the second half of the year. Meanwhile, the Bank’s next rate decision is scheduled for April 10. Should you have questions or wish to discuss adjustments to your mortgage strategy in light of these developments, please don’t hesitate to reach out.

Together, we can navigate these changes to ensure your mortgage strategy remains well-aligned with your financial goals.

Best regards!

Given today’s affordability challenges, finding your perfect dream home right off the bat isn’t always feasible. 

But did you know there are financing options that allow you to incorporate renovation costs directly into your mortgage? This means as long as you find a home in your desired location, you can then customize or update it to meet your specific needs and tastes.

Home renovations not only help make your new home truly yours, but they can also increase its value. 

Kitchen remodels, bathroom additions and energy-efficient upgrades are among the top renovations that can yield the highest returns on investment. Secondary suites have also emerged as popular reno projects as a way for homeowners to create an additional revenue steam by renting out a portion of their home. 

However, the question of funding these projects often presents a challenge. That’s where your mortgage steps in, not just as a means to own your home, but as a resource to improve it.

How to access your home equity

Let’s take a look at some of the key financing options available for renovation projects.

1. Purchase plus improvements
This financing solution is a valuable tool for homeowners who want to renovate a newly purchased property, allowing you to add the cost of your renovations to your mortgage for as little as 5% down. By incorporating renovation expenses into your mortgage, you can make improvements right from the start, turning a nearly-right house into your perfect home.

2. Home equity loans and lines of credit
For existing homeowners, one way to access the equity they’ve built up is through a home equity loan or a home equity line of credit (HELOC). A home equity loan provides you with a lump sum, ideal for funding a significant renovation project with a defined budget. A HELOC, meanwhile, works more like a credit card, giving you access to a line of credit based on your home’s equity, which you can draw from as needed. This option is particularly useful for ongoing or phased renovation projects.

3. Mortgage refinancing
Another avenue is refinancing your mortgage. This involves taking out a new mortgage that replaces your existing one. If your home’s value has increased since you first purchased it, you may be able to borrow more than what you currently owe, providing extra funds that can be used for renovations. 

However, the current interest rate climate may mean refinancing at a higher rate. But with rates expected to fall over the next year and beyond, refinancing could soon become a more appealing option.

4. Government assistance programs
A fourth option is to take advantage of the multitude of government programs available to help homeowners finance their home improvement projects. These programs often include grants, loans, and tax credits aimed at encouraging energy-efficient upgrades, improving accessibility for seniors or individuals with disabilities, and supporting low-income homeowners. Each program has specific eligibility criteria and application processes, and generally vary by region and the scope of the renovation project.

Expert advice is key
Before proceeding with any financial decision, give me a call so I can help you understand the options available, the total funds you may be able to access, and how to align your renovation goals with your financial situation. A well-informed decision can lead to a more beneficial and stress-free renovation experience.

Let’s unlock the potential of your home’s value together!!  

The Bank of Canada leaves benchmark rate at 5.00%

As expected, the Bank of Canada has left its key lending rate unchanged at 5.00%.

This follows 10 previous rate increases over 12 rate announcements, which raised the overnight target rate by 475 bps since March 2022. 

In its statement, the Bank said it is “still concerned about risks to the outlook for inflation, particularly the persistence in underlying inflation.”

However, the Bank added that with expected GDP growth of just 0.8% in 2024, it expects inflation to continue to ease from around 3% in the first half of 2024 to its 2% target in 2025. 

What happens now?

As a result of today’s decision, prime rate will remain unchanged at 7.20% and there will be no changes to existing variable-rate mortgages. This announcement also has no impact on fixed-rate mortgage holders.

The Bank’s next announcement will take place March 6. 

If you have any questions or concerns about the rise in borrowing costs over the past year, I encourage you to reach out so we can discuss your personal situation and options. 

• Read the Bank of Canada’s full statement here.
• Read the bank’s latest Monetary Policy report here.

The holiday season can often bring a mix of joy and financial stress. For those with mortgages up for renewal, feeling the pinch of inflation or concerned with any changes to an already tight budget, it may hit all too close to home.

As a mortgage professional, I understand the prospect of seeing your payments rise at renewal—now or even two years from now—can be daunting. That’s why I’d like share a few practical tips to help you manage this anxiety effectively.

1. Understand your mortgage contract

Start by thoroughly understanding the terms of your mortgage. Familiarize yourself with details like your current interest rate, the renewal date, and any penalties for early renewal or refinancing. This knowledge will help you understand your mortgage options.

2. The importance of budgeting and financial planning

Develop a robust budget. Anticipate potential increases in your mortgage payments and adjust your spending accordingly, now or over the next few months. Financial planning tools and professionals can be helpful in this process, and I would be happy to provide you with a referral if needed. 

3. Explore renewal options

If your mortgage renewal is approaching, consider shopping around for better rates. Financing your mortgage with a different lender could potentially result in a lower interest rate, but it is important to be aware of certain restrictions, which I can gladly elaborate on. 

4. Stay informed about market trends

Keep yourself updated about the real estate market and interest rate trends. This knowledge can help you make informed decisions when it comes time to renew or refinance your mortgage. I’m here to help you stay on top of those trends.

5. Communicate with your mortgage professional 

Communicate openly with your mortgage professional, we are here to help. If you’re facing financial hardship, there may be tools available to you. Lenders are often willing to work with you to find appropriate solutions in challenging financial times, with some offering assistance programs for those struggling with their payments. These vary by lender, but can include temporary payment deferral plans, skip-a-payment options or amortization extensions. 

If you are finding your current situation overwhelming, don’t worry, you’re not alone. Contact me today so we can review your finances and all of the options available to you. By staying informed, planning ahead, budgeting and taking care of your mental well-being, you can navigate this challenging period more effectively and enjoy the festive season with less financial worry. I’m here to help de-stress your mortgage needs. 

Barb Eglauer
Mortgage Agent
(780) 720-5185
barb.eglauer@mortgagegroup.com

When can mortgage interest be tax-deductible in Canada?

Wouldn’t it be nice if your mortgage interest could be tax deductible? What if I were to tell you it is possible in Canada. Maybe not in all cases, but I’d like to share some situations where it can be. Let’s demystify this seemingly complex topic and break it down to provide you with a better understanding of how it works.

Unlike our neighbours in the United States, Canadians typically can’t deduct mortgage interest from their primary residence to decrease their overall taxes. However, there are several strategies, that may make mortgage interest tax-deductible.

The Smith Maneuver

One such example is the Smith Maneuver, named after British Columbian financial planner Fraser Smith who developed and popularized this tax strategy.

The way it works is homeowners re-borrow the principal portion of their mortgage payment after each payment is made and invest it in income-producing assets. This includes investments such as dividend-paying stocks, mutual funds, real estate and bonds. The interest on this borrowed money is tax-deductible, as it is used to generate investment income. 

Over time, this approach not only reduces the homeowner’s tax liability but also helps in building a substantial investment portfolio while paying down the mortgage. 

Rentals and home-based businesses

For those with investment properties or working from home, the process of deducting mortgage interest can be more straightforward. 

If you own a secondary property that generates rental income, the mortgage interest may be considered part of your operating cost. This allows you to claim back the mortgage interest, along with other deductible expenses such as property taxes, utilities, maintenance, repairs and more. 

For property owners who rent out a portion of their primary residence, deductions are proportional. The percentage of the property used for rental purposes determines the amount of mortgage interest and other expenses that may be deducted. For example, if 25% of the property is rented out, then 25% of the mortgage interest and other related expenses may be claimed as deductions.

Another way owners may deduct a portion of the mortgage interest is if they regularly work from home and have designated a specific area of the home exclusively for business purposes. In this case, the deduction would correspond to the percentage of the house being used for work purposes.

That said, It’s crucial to consider potential pitfalls when making deductions on your principal residence to reduce taxable income, such as affecting the principal residence taxable gain exemption–a benefit no one wants to lose. That’s why I work closely with your accountant or financial planner to help you avoid such issues. And if you need a trusted professional, I can make that introduction.

Contact me for more information

Navigating tax-deductible mortgages in Canada may seem daunting, but with the right knowledge and strategies, and being aware of any downsides, it does have the potential to provide significant financial benefits. Whether you’re considering the Smith Maneuver, renting out your property or running a home-based business, understanding the potential tax deductions, legal framework and pitfalls is key to maximizing your investment.

Don’t hesitate to contact me if you would like to know more about these strategies and how they may apply to your personal situation.