# REfinancing dueplex for bungalow purchase



## Kozy (Feb 6, 2012)

My wife and I own a duplex with two units. We live in one and rent the other out. It has been four years now and we are wanting to have our own house (MTG term is due). We have been claiming the rent and writing off half the expenses. I understand that we need to do an appraisal when we switch residences. Our plan is to refinance the duplex with a HRLC (home line of credit) and max it out to 80% LTV and use the money for a down payment on the bungalow. My question is, will CRA allow this? Our plan is to rent both units out and have the HRLC as interest only required payments. Then we will put the amount left over from payments and expenses to-wards the bungalow. Does this make sense? thanks


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## OhGreatGuru (May 24, 2009)

Check Cardu's Aug.6, 2010 post on this thread: http://www.canadianmoneyforum.com/showthread.php?t=2978&highlight=refinance&page=2

I believe what you are proposing woud not be acceptable to CRA. It's essentially a scheme to make the mortgage interest on your principal residence tax deductible, which is not permissible.

I'm sure there are other threads discussing this as well if you look for them.


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## marina628 (Dec 14, 2010)

I believe you can pull out the initial down payment and any extra payments you made but anything over than would not be allowed.
Here is my situation on one rental,we had to lock in for 5 years @ 5.49% ,to offset the high interest I did a 5% cash back and been making the maximum payment and paying down my 15% prepayment.In 2015 when mortgage is up ,I can refinance and take all the extra payments back .This is about the only way you can pull equity out without getting in trouble with CRA.I ran this by CRA before I signed the mortgage in 2009 and they said this was allowed,you need to be able to back up the numbers with them.


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## Kozy (Feb 6, 2012)

Thanks for the responses...
This changes things a bit now. I think we may still get a HRLC. Then split the HRLC into two with one being the original MTG- continue to write off. Second one being the amount that is over the original MTG amount and use for the down payment- not writing it off. I think this will work.


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