Question

Alexi's bought a home for $1,000,000 during year 1. She made a $200,000 down payment and financed the other $800,000. This home is her only residence. Assume that by year 10 her home had appreciated to $1,5000,000 and the balance on her mortgage was down to $600,000, interest rates had gone down and Alexis refinanced her home. She borrowed $1,000,000 and paid off her first mortgage. She used the remaining $400,000 for projects unrelated to her home. How much is her qualifying home-related debt for tax purposes?

The country its been taxed on is irrelevant

Answer 1

Qualifying home-related debt for tax purposes requirements are:

Interest on a mortgage for your main home

• The property can be a house, co-op, apartment, condo, mobile home, house trailer or a houseboat.
• The home has to be collateral for the loan.
• The home must have sleeping, cooking and toilet facilities to count.
• If you get a nontaxable housing allowance from the military or through the ministry, you can still deduct your home mortgage interest.
• A mortgage that you get in order to “buy out” your ex’s half of the house in a divorce counts.

In the Present case Alexi bought a home for $1,000,000 during year 1. She made a $200,000 down payment and financed the other $800,000. This home is her only residence. Balance on her mortgage was down to $600,000, interest rates had gone down and Alexis refinanced her home. She borrowed $1,000,000 and paid off her first mortgage. She used the remaining $400,000 for projects unrelated to her home.

So Alexi can can only claim deduction of interest for Loan amount of $600,000 only as she doesn't used remaining Loan amount (i.e, $400,000) for her Home.