Can I deduct extra mortgage interest after refinancing for personal spending?
Rental Refinancing: Follow the Borrowed Money. Understand the Canadian tax rules, records to gather and practical next steps before preparing your return.
Request a quote →Arsen Accounting Services · Prepared October 29, 2026
Rental income: 10 questions for property owners · Browse the 100-article collection
The direct answer
Interest deductibility follows the use of borrowed money, not simply the property used as security. CRA specifically distinguishes refinancing a rental for personal use from borrowing for the rental or another eligible income-earning purpose. Personal-use borrowing does not become a rental deduction because the mortgage is registered against a rental property.
Trace the use of the funds
A mortgage secured on a rental property can fund several different purposes. Record where the borrowed money went, including transfers to personal accounts or other investments. The property used as security is not the complete interest-deduction test. A clear flow of funds helps the preparer distinguish borrowing connected with earning income from personal spending.
Keep mixed borrowing understandable
If one loan funds both rental and personal uses, preserve the draw, repayment and interest history. Avoid repeatedly moving funds without records and expecting the year-end balance to explain the original purpose. Before refinancing, discuss how the planned use will be documented. After the fact, provide the actual transactions rather than a preferred description of the borrowing.
What to gather before the review
- Loan and refinancing statements
- Bank trail showing use of each advance
- Interest, repayments and transfers between uses
Is all mortgage interest deductible when the rental property secures the loan?
No. Security alone is not enough. The use of the borrowed money and the applicable interest rules must support the claim, including any allocation for personal use.
Your next step
Trace where the additional funds went and keep the old and new loan statements.
Related reading
Official sources
Rental expenses you can deduct
Sources checked for this collection on October 28–29, 2026. Annual forms may refer to a specific tax year. Use the rules and limits for the year being filed. General information; eligibility, elections and deadlines depend on the facts. No deduction or tax saving is guaranteed.
Let's discuss your tax needs.
Tell us the tax years, province and filing needs. Prepare a short quote inquiry or contact us directly to discuss availability and scope.
Email: elena@arsenaccounting.com
Phone: (647) 297-4126
Before you send
Please provide a brief description of the assistance you need. Do not email SINs, passwords, banking details or sensitive tax documents in your initial inquiry. We'll discuss an appropriate secure method of sharing documents if we proceed.
Information on this website is general and is not individualized tax advice. Engagements are subject to acceptance, agreed scope and applicable terms.