Is second mortgage interest tax deductible?

Q: Is second mortgage interest tax deductible in Canada?

Sometimes, and it depends entirely on what the money is used for. Where borrowed funds are used to invest or for business purposes, the interest may be deductible under CRA rules. Where they are used for personal debt or renovations, generally it is not. This is a question for an accountant, and the answer turns on your specific circumstances.

Q: Does the type of mortgage decide whether interest is deductible?

No. What matters is what the borrowed money was actually used for, not the type of loan. The same second mortgage on the same house at the same rate can be treated completely differently depending on where the funds went.

Answered by Rajiv Verma, Mortgage Broker · Reviewed 18 August 2026 · About a 2 minute read

The direct answer

Sometimes — and it depends entirely on what the money is used for. Where borrowed funds are used to invest or for business purposes, the interest may be deductible under CRA rules. Where they are used for personal debt or renovations, generally it is not. This is a question for your accountant, not for your mortgage broker, and the answer turns on your specific circumstances.

THE SHORT VERSION

Use of funds decides it — not the type of mortgage
Investment or business purpose: interest may be deductible
Personal debt or renovation: generally not
It depends on CRA rules and on your own situation
Get this confirmed by an accountant before you rely on it

Why the use of funds is the whole question

People often assume deductibility follows the loan — that a mortgage is a mortgage and the interest either counts or it does not.

It does not work that way. What matters is what the borrowed money was actually used for. The same second mortgage, on the same house, at the same rate, can be treated completely differently depending on where the funds went.

Where I stop, and why

I am a mortgage broker, not an accountant, and this is genuinely accountant territory. Deductibility depends on CRA rules, on how the funds were traced and used, and on the structure of your affairs. Getting it wrong is expensive in a way that a mortgage decision is not. You want someone who does this properly to confirm it in writing before you plan around it.

What I can do is make sure the mortgage is structured so that the use of funds is clear and documented — because if there is a case to be made, clean records are what make it possible. That is worth setting up at the start rather than reconstructing later.

What to bring to your accountant

What the funds were used for, precisely — and in what proportions if it was more than one thing
The mortgage documents and the statement of adjustments
Evidence of where the money went — transfers, purchases, payments
Whether any part relates to an investment or a business
Your wider tax position, which is where they will actually make the call

What to do next

If deductibility matters to your plan, speak to your accountant before the mortgage is arranged, not after. Structure is much easier to get right at the start.

Tell me what your accountant needs and I will make sure the file supports it.

Talk it through →

Related questions

Answered by Rajiv Verma, Mortgage Broker · Mortgage Architects — FSRA Brokerage Licence #12728 · Licensed in Ontario · Office 289.505.0631 · Direct 647.291.7116

This page is general information, not tax advice. Deductibility of interest depends on CRA rules and on your specific circumstances. Confirm your position with a qualified accountant before relying on it. Every file is reviewed individually.