Hi OJ, Great tip... and perfectly applicable in the lower 48 (plus AK, HI, territories & district) as well! ;~) Its all in "the papertrail." Document that you've borrowed funds for the PURPOSE of investment, and 100% of the interest costs are deductible off THE TOP LINE (the gross revenues, not the net,) as a cost of business. This is without regard to what property you may choose to use as collateral for the loan (so a loan collateralized by stock, or a loan collateralized by your personal residence... BOTH enjoy 100% top-end deduction as a business expense against investment revenue, as long as the funds are used for investment.) In the U.S.... although we have a traditional mortgage interest deduction for INCOME taxes when we use leverage for residential purchase (up to $1MM purchase money, and up to $100k cashout equity money...) the deduction is at a mirror percentage to our marginal income tax percentage... This means that if you are in a 15% marginal income tax bracket, you get to reduce your taxes by 15 cents for each dollar of mortgage interest you pay. If you are in a 25% marginal income tax bracket, you get to reduce your taxes by 25 cents for each dollar of mortgage interest you pay. This applies to the interest you pay on any purchase money mortgage up to $1MM (interest on purchase leverage above $1MM isn't deductible at all.) IT also applies to interest you pay on equity cashout refinance money leverage up to $100,000 (any interest on equity loans without a defined investment reason greater than $100k is not deductible.) HOWEVER.... as you just pointed out.... A) Cash in your market investments to liquidate, B) Use said cash to retire all mortgage balances, C) RE-borrow the funds (perhaps now even at a significant discount interest rate also... double bonus?) D) RE-acquire your desired investment positions. In doing so; 1) Canadians will make your mortgage interest 100% deductible when it wasn't at all before, 2) United Statesians will make your mortgage interest 100% deductible when it was only partially deductible before. ADD TO THIS... in the U.S. tax code there are also sometimes benefits for "booking losses" by selling an investment that is "down" and thereby formally recording the loss. Such "realized losses" can be used to offset other gains... and if you didn't prove the loss by the sale, you would suffer the loss anyway, yet STILL pay the tax on other upside gains. Another strong example why the proper structuring of one's finances from the "big picture" holistic perspective is so critical. "Divide and conquer" is a recipe for poverty in finance. Cheers, Dave Donhoff Leverage Planner

We have always kept a good tally of our deductions, and also tithe. We had been keeping those tallies for years, and giving as much as we could feel comfortable giving, and found out after the fact that we usually did not exceed the standard deduction. We don't hold a mortgage, and that could be why. Since finding that out (we have an accountant do our returns), I am more careful now on my timing for contributions, monies into an IRA, expenditures, capitol gains. I donate to charities/churches because I want to help them, but there is nothing wrong with also being able to use it to offset taxes if you can. I guess standard deductions are nice, but if you don't exceed them, even when you give generously, and others who don't give anything still get the same tax breaks......well, it sort of takes the hair off where fairness is concerned. I have been known to make phone calls to my accountant to ask "Is this a good time to buy capital equipment?", "Is this a good time to make a withdrawal from a deferred account?" It really helps to sit down at times other than tax time, to crunch your numbers after the fact and project what your tax liabilites will be or how you can plan deductions to your best tax benefits. Like you are doing, btw. But a lot of people don't. Always run your household finances, like it were a business.

Hi Colleen, I'm a bit confused -- when you say it'd be cheaper to take a mortgage on our current home to pay for a cottage/cabin, what about what Mnk716 and Lucy (above) said about putting our primary residence at risk by borrowing against it to pay for a second home? With all due respect to the caring intention behind their replies... the idea of segregating the effects of potential default risks by segregating the selection of which properties you use as collateral... is silly & untenable for the most part. Their advice comes from a mistaken assumption that as life becomes challenging it is easy to "sacrifice" certain assets that were used as collateral and keep all other assets and portions of your financial life in simple, easy balance. The reality is; when it rains, it pours... and you'll end up "rallying ALL the troops" and using EVERY resource at hand to solve yoru troubles if/whenever you face them. That's human nature... especially for anyone who has ever been a parent. If you followed their advice and left your primary residence free & clear, and leveraged only against the vacation home... then fell into dire straights to the point where you were facing the possibility of defaulting on your monthly bills & payments; A) You would then be likely frantically trying to re-access that locked-in equity in your primary home to save your bacon (which raises two more problems; B) It would likely be too late to qualify after you fell into desperation, and C) Your legal liabilities would stretch into all parts of your life anyway. Also, when you say "especially cheaper than a vacation log home"......is there something iffy about vacation log homes? Actually, yes... doubly. A) Log homes are a construction type that are considered (rightly or wrongly.... there are many fans and defenders of quality log-built homes) riskier to the lenders. Because of this lender price a "risk premium" on top of any financing that is collateralized by a log home. B) Vacation homes are seen as a 2nd-tier payment priority risk (to understand why, we don't have to look further than Mnk716 and Lucy's feelings.) When the "fit hits the shan" and there's not enough funds to make all the monthly payments, the lenders assume that you will pay in the following order to the amount of funds you have; 1) Your primary residence, 2) Your vacation residence, 3) Your real estate investments, 4) Your consumer debt. Because of this, vacation homes are also priced an additional "risk premium." THUS, to finance a property that is both a log home, AND a vacation home, will take a double-hit increase to rates & terms. BETTER to start from the "big picture" of your total balance sheet (all your debts, all your assets, and all your available leverage (and at what levels of costs.)) Then design from that where your best use of funds will come from. *I've lurked in the Buying And Selling Homes long enough to know you're the Official Guardian Angel of the forum! WOW! Thank you so much for that "hug"! Cheers, Dave Donhoff Leverage Planner

I didn't want to bore everyone with all the details, but the only way to get this house will be an all cash offer. This is an off-market sale; the seller is a licensed Realtor in my Realtor's office and is in a difficult personal situation that requires her to sell fast and quietly. The seller is already in contract with another buyer. The buyer has missed his date to remove his financing contingency. The seller is going to give the buyer Notice to Perform as soon as we have a signed backup contract. The lender has told the seller that the buyer's loan will come through by the end of this month (3 weeks) but the seller can't wait that long. If we have a financing contingency, even a 15-day one which my mortgage broker says is possible, we won't give the seller enough incentive to sell to us. Instead, she will put her house on the MLS and have an all-cash buyer within 3 or 4 days. That's how hot the market is where I live. She seems to be willing to do this. We'd lose the sale or have to come up with a higher price due to the bidding war that's likely to occur. Just for background on this zipcode, there have been 3 houses on the MLS in our target area of 20 square blocks in the past 2 months. We bid on the first one and lost out to a higher bidder - there were 5 bids. The 2nd one we didn't bid on - it also had 5 bids. The 3rd one we didn't bid on - it had 2 bids. All 3 houses sold at 3-8.5% over asking. Since this house is a lower price than the one we bid on last month, we're confident that the loan won't be a problem. We were pre-approved for the higher loan, and my mortgage broker has been working through the process since then to make sure everything's in place for a fast turnaround on a new loan.