Real Estate

Changing Property from Primary Residence to Rental - Refinance?

  • Last Updated:
  • Dec 6th, 2019 2:18 pm
[OP]
Newbie
Jun 17, 2015
48 posts
4 upvotes
Thornhill, ON

Changing Property from Primary Residence to Rental - Refinance?

If I am going to change my primary residence into a rental property, is it possible to refinance and pull additional equity from the property since I will now have rental income to offset my expenses? The property is currently mortgaged.

Thanks.
3 replies
Deal Addict
Mar 22, 2010
2972 posts
860 upvotes
you can refinance whether it's your principal residence or rental but rate would be higher for rental case. I am not quite understanding your intention to change your current residence to rental. Is this about capital gain? claiming expenses? Are you trying to get another property?
Member
Nov 24, 2015
343 posts
213 upvotes
Toronto, ON
hereforit wrote: If I am going to change my primary residence into a rental property, is it possible to refinance and pull additional equity from the property since I will now have rental income to offset my expenses? The property is currently mortgaged.

Thanks.
Yes.
You should refinance (depending upon how much you can qualify for, based on lender's criteria) before converting to rental. This way all of your mortgage interest will he deductible from the day 1 of rental use of the property.
Deal Addict
User avatar
Jan 2, 2012
3979 posts
1847 upvotes
Toronto
Natasha321 wrote: Yes.
You should refinance (depending upon how much you can qualify for, based on lender's criteria) before converting to rental. This way all of your mortgage interest will he deductible from the day 1 of rental use of the property.
No, that is not how it works. Only the original mortgage amount used to actually buy the property would be tax-deductible when it turns to a rental. Any refinanced portion assuming funds are used for personal use, would NOT be tax-deductible. Perhaps if the refinanced portion was to be used for renos on the rental property then it would qualify.

CRA is very specific about this: https://www.canada.ca/en/revenue-agency ... enses.html
Example
Karim owns and rents a semi-detached house. This year, he refinanced the property to increase the mortgage for a down payment on his personal residence.
He cannot deduct the additional interest on the mortgage when he calculates his net income or loss from his rental property, because he is making personal use of the funds.

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