Newbie here. My wife and I have a primary residence with really good equity and we are keen picking up an investment property. Here's the question, I apologize in advance if it's been asked and answered many times before.
what is the easiest way to leverage some of our equity for a 20% downpayment (we can afford the increase in primary mortgage)? I'm hoping for advice on how to ensure the interest on the amount leveraged is tax deductible because it's been used for an investment. Is a home equity line of credit the best option or a straight refinance and pull cash out?
Also, it would appear that the complexities of our finances have surpassed our accountant. He is good at answering direct questions but not as advisory as we would like. Any recommendations of someone in the lower mainland, north Vancouver area would be greatly appreciated.
A separate LOC is recommended, i.e do not mix personal use of funds from LOC and investment funds.
Also, most banks want to see CASH in a bank account before you can qualify for another mortgage for an investment property, as they will always ask "Where is the 20% downpayment coming from?". The answer is: from my XYZ bank account - see my attached recent printout of balance.
Of course, if you buy an asset in cash, say a cheap US property, then this is not required.
try Navaz as an accountant .. he lives in lower mainland .. his website is here: www.realaccountant.com !
My name is Collin Bruce - I am the Peter Kinch approved Broker for Edmonton. The best thing to do is to get into a re-advanceable mortgage like the Scotia STEP Mortgage for the First Line Matrix mortgage.
With these products you can leverage up to 80% of the value of your home. And the good thing with the HELOC is you don't pay any interest on the funds until you have used them. (unlike a mortgage where you will start paying the second the money hits your account.)
With these types of mortgages every time a principal payment is made (either a lump sum payment or the principal portion of your regular payment) the line of credit limit increases. You just have to make sure you keep track of what is being used towards the purchase of the rental for taxes. Anything you use for an investment, the interest is tax deductible. Plus what this does is set you up well for future property purchases. You don't want to try and put a HELOC on your principal when you have a bunch of rentals - it is just that more difficult and plus you are building up your Line of credit limit as you pay down the mortgage.
Go to www.peterkinch.com, they are in Coquitlam and can help you out.
I am in the lower mainland and have been a REIN member for several years now. I would be happy to meet with you to assist with your questions.
Simple answer is to set yourself up a home equity line of credit. That may be something that you can go back to your existing mortgage lender for, or it may be something that is available elsewhere. The first step is to review your existing mortgage to see if there's any benefit of refinancing into a mortgage/loc combination product. The second option is to set up a HELOC as a second mortgage.
I would be happy to meet with you in person or over the phone to work through the above options and figure out which alternative is the most cost effective. Getting set up properly today will be one of your keys to success as a real estate investor.
Feel free to click on the link below for my website or you can call me direct at 778-686-8326.
As far as the tax credit is concerned , it can be exempted to the limit equal to interest payment payable each month or any other payment pattern which agreed at the time of the contract. The rest of the problem that you have are quite simple and answered previously.
