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Rental cash damming

Your rent is paying down the wrong mortgage.

Same rent. Same bills. Different order. Your rent goes onto your home mortgage, and your rental's bills get paid with borrowing that may be tax-deductible. Your cash flow and total borrowing stay the same, while more of your debt works for you at tax time.

Home mortgage: not deductible Rental borrowing: may be deductible
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Watch: rental cash damming explained, about 6 minutes.

One month, three moves

The rent takes a different route.

Step oneRent goes onto your home mortgage

Your tenant pays $2,000. It goes straight onto the mortgage on the home you live in. Your non-deductible debt is $2,000 smaller.

Step twoThat room reopens on your credit line

With a readvanceable mortgage, the $2,000 you paid down is available again. Borrowed for the rental, it is an investment loan.

Step threeThe line pays the rental's bills

Mortgage, property tax, insurance, upkeep. The bills get paid like always, and $2,000 of debt has moved to the side that may be deductible.

Free, about two minutes

Tax Savings Preview

Round numbers are fine. You'll see a range, not a promise. The example below is filled in with our case study; change any number to see yours.

Your home
Your rental

Include the rental's mortgage payment, property tax, insurance, condo fees and maintenance. The rental must be held in your own name, not a corporation.

Your income

Case study, an illustration and not a real client

A break-even rental, start to finish

Where Sam starts

Sam owns her home, with a $400,000 mortgage at 4.45% and 25 years left, about $2,200 a month. Her rental brings in $2,000 a month and costs about $2,000 to run, so it breaks even. Her taxable income is $145,000, a marginal tax rate of about 43% in Ontario.

Every month

The $2,000 of rent goes straight onto her home mortgage. Because the mortgage is readvanceable, that $2,000 opens up again on her line of credit, and she borrows it back to pay the rental's bills. The line's interest (about 5% in this example) is added to its balance, so her monthly cash flow doesn't change.

Every spring

At tax time, the deductible interest turns into tax savings. Until her home mortgage is fully converted, Sam puts those savings on it as an extra prepayment, so there's less left to convert.

Where she ends up

After about 9 years her home mortgage is fully converted: about $281,500 of investment borrowing. She keeps making the same $2,200 payment toward it, plus each year's tax savings, and is completely debt-free in about 22 years. That's 3 years sooner than her original 25, without paying a dollar more.

~9 yearsto fully convert her home mortgage into tax-deductible borrowing
~22 yearsto be completely debt-free, 3 years sooner than her original 25
~$66,700in tax savings along the way
~$79,200stays in her pocket: 3 years of $2,200 payments she never makes
End of yearHome mortgage, regular payments onlyHome mortgage, with rental cash dammingTax-deductible borrowingTax savings that year
1$391,024$366,533$24,552$240
3$371,842$293,953$77,449$1,346
5$350,894$212,305$135,839$2,572
7$328,019$120,509$200,292$3,917
9$303,040$17,356$271,438$5,420
Fully converted, about 9 years 4 months$298,700$0about $281,500First 9 years: about $24,100

Before you start

What to know

Rental cash damming works well for the right landlord. These are the points that matter most.

  • It's a long-term strategy. The benefits build over years.
  • The setup is everything. Borrowed money has to be used only for the rental and be easy to trace. Mixing personal and deductible spending can put your deductions at risk.
  • Life will change. Rates, rent, expenses and income move over time, and that can make results better or worse.
  • Your borrowing grows. The credit line balance goes up over time, and its rate is usually variable.
  • Results aren't guaranteed. Deductibility depends on how borrowed money is used. Confirm your setup with your accountant.

How we work together

Start free. Decide at every step.

You see your range before you pay anything. The Blueprint is built on your real numbers, and if you go ahead, its cost is credited toward the Full Strategy.

Jonah Hoyos working at a desk with a laptop

  1. See your range

    Free

    Try the Tax Savings Preview above.

  2. Discovery call

    Free, 15 minutes

    We get to know your situation and see whether rental cash damming fits.

  3. Your Strategy Blueprint

    $500

    Scenarios built on your real numbers, a written Blueprint, and a call to walk through it.

  4. Full Strategy

    $5,000, Blueprint credited

    We set it up with you: accounts, tracking, your monthly routine, and a tax-time check-in. $1,000 for each additional property.

A straight answer

Who this isn't for

I'd rather tell you no on the first call than eighteen months in.

  • Rentals held in a corporation. This works only for rentals you own personally.
  • Homeowners without enough equity for a readvanceable mortgage, usually at least 20%.
  • Anyone planning to sell the rental soon, or whose home mortgage is almost paid off.
  • Anyone who couldn't carry the line if the unit sat empty for a few months.
  • Anyone who doesn't want to keep simple monthly records, or wants a guaranteed result.
Jonah Hoyos in a navy suit, seated in an armchair in a bright studio

Who you'll work with

Jonah Hoyos

Mortgage strategy consultant, Cashflowconsults

Most people are taught to chase the lowest rate. The bigger number is how your debt is structured.

I work in the mortgage industry, and I'll be honest: most Canadians are overpaying on their mortgage, and nobody tells them. We spend years in school and never learn how a mortgage actually works.

I run these strategies on my own home. Cashflowconsults is where I help homeowners and landlords map out the structure, set it up properly, and keep it on track through tax time.

I look at your situation, build the plan around your numbers, and coordinate with your mortgage professional, accountant and financial planner. Each of them advises within their own expertise; I bring the strategy together around your goals.

Make your mortgage work for you.

Questions

What landlords ask first

Is cash damming legal?

Yes. It relies on a long-standing tax principle: interest on money borrowed to earn rental or investment income may be deductible. The CRA itself has used the term "cash damming" in its guidance. What matters is how the borrowed money is used, which is why the setup and record-keeping are the core of the work.

Do I need a special mortgage?

You need a readvanceable mortgage, where principal you pay down becomes available again on a linked line of credit. Many lenders offer one. If yours doesn't, switching is usually best timed with your renewal.

Does it work if my rental loses money each month?

Often, yes. A cash-flow-negative rental still has expenses to pay with borrowed money. The Blueprint models your actual numbers so you can see whether it makes sense for you.

When does the investment borrowing get paid off?

That's your choice. Some landlords pay it off when they sell the rental. Others keep making their regular payment plus their tax savings, like Sam. Higher earners often hold it longer for the deductions.

What does my accountant need to do?

Claim the deductible interest on your rental income each year, using the records you keep. We coordinate with your accountant so they see the structure before it starts.

Can I combine this with other strategies?

Yes. Rental cash damming can be stacked with debt conversion, a debt swap or cash flow diversion. We'll look at what fits on your discovery call.

Other strategies

Every situation is different

Some of these can be stacked together. We'll talk through which ones fit on your free discovery call.

Strategy · $999 consult

Debt conversion

Turn your home mortgage into an investment loan over time, so the interest may become deductible while you build a portfolio from the payment you already make.

Strategy

Debt swap

Use non-registered investments to pay down your mortgage, then borrow to reinvest. Watch the superficial loss rule if you sell at a loss and buy back the same holding.

Strategy

Cash flow diversion

Keep investing the same amount each month, routed through your mortgage so more of your borrowing may become deductible.

Strategy

Offset mortgages

An all-in-one account where the money you keep in it lowers the balance you pay interest on, every day.

For landlords

Multiple properties

More rentals can mean faster conversion. The Full Strategy covers each additional property for $1,000.

Custom quote

Private Advisory

Ongoing, one-to-one strategy for larger portfolios and more complex situations.

Ready for your exact numbers?

Start with the Tax Savings Preview, then book a discovery call.

Book a free discovery call Try the Tax Savings Preview

Email: strategy@cashflowconsults.com

Jonah Hoyos smiling, seated on a couch