Mortgage structuring
Cash damming: how Canadian landlords can make part of their mortgage interest tax-deductible.
If you own a rental property and still carry a mortgage on the home you live in, the order in which your money moves matters. With cash damming, your rental income goes toward paying down your home mortgage faster, while your rental property's expenses are paid from a separate line of credit. Because that borrowed money is used to earn rental income, the interest on it may be tax-deductible — so your total debt stays the same, but more of it sits on the side that carries a tax benefit.
How it works
Your rent payments go straight onto your home mortgage
Rather than leaving rental income in a chequing account where it quietly absorbs into day-to-day spending, it is directed against the mortgage on the home you live in.
The debt with no tax benefit gets paid down first
Interest on the mortgage for your own home earns you nothing at tax time, so that is the balance you want to shrink as quickly as possible.
Rental property costs are paid from a separate line of credit
Property tax, insurance, repairs, condo fees and other operating costs of the rental are covered by a dedicated line of credit instead of out of pocket.
The interest on that borrowing may become tax-deductible
Because those funds are borrowed to earn rental income, the interest on the line of credit may be deductible. Your total debt does not grow — but over time, more of it sits on the side that carries a tax benefit.
Who this tends to suit
Cash damming is worth a conversation if you own at least one rental property, still carry a mortgage on your own home, and are comfortable keeping a dedicated account and line of credit tidy. The larger your home mortgage relative to your rental debt, the more there is to shift.
It is not for everyone. If you have no income-producing property, if your own mortgage is nearly paid off, or if keeping the accounts cleanly separated would be a struggle, the structure adds paperwork without much payoff. Our brokers will tell you honestly if the numbers do not justify it, rather than set up something you do not need.
Common questions
Important disclaimer
This page is mortgage structuring and education, not tax, legal, or accounting advice. Whether interest is deductible depends on your specific facts and is determined by your accountant and the Canada Revenue Agency. The strategy is described in CRA Income Tax Folio S3-F6-C1 and rests on Income Tax Act 20(1)(c). It only works when the borrowed money genuinely earns income, the funds are kept cleanly traceable in a dedicated account, and proper records are kept. Confirm with a qualified accountant before acting, and involve a lawyer for any title, ownership, or security matter.
Talk to our team about your situation
Every setup depends on how your properties, accounts, and mortgages are already arranged. A short call with one of our brokers will tell you whether this is worth building around — no pressure, and no fee for standard brokered files.