I am buying a second home as a rental property. Can I deduct mortgage interest?

You would not be purchasing a second home. Buying a second home would indicate you plan to use the house part of the year. You are purchasing an investment property.

On your mortgage loan application there are blocks to check indicating the use of this property. Checking the appropriate box would indicate the rate of interest you would be charged.

This property would have it's own mortgage, interest rate and payment based on your credit score, the way your pay your debts on your credit report.

You will not be able to roll this mortgage into your existing mortgage you might have on your current residence.

Since you are purchasing an investment property your interest rate would be a bit higher than a person that would purchase a house to live in. One is called an owner occupied property and the other is called a non-owner occupied property.

Once you have purchased the rental property you might deduct any improvements you make on the property, to include the interest you pay annually on the property. The federal tax form used to make these deduction is called a schedule "E"

You might consider joining the American Housing Association for landlords. This association offer many forms necessary to be a successful landlord as well as vanilla tenant legal information. Also you might consider hiring a CPA to do your taxes as these two might be a tax deduction item.

I hope this has been of some benefit to you, good luck.

"FIGHT ON"

I think that the issue you are running into is the terminology that you are using. A mortgage is a loan used to buy property, secured against the property it is buying. What you want to do is use the equity in your home to buy a different property. Once a bank knows that, they are most likely going to offer you a home equity loan rate, not a mortgage rate. Once you wrap your head around the idea that what you are doing, in essence, is taking out a loan to pay for the rental property, the IRS guidelines on deducting the interest should be easier to figure out. In other words, how would they handle it if you borrowed that money from investors?

Also, you are aware that if you do this, and for some reason can not pay the loan back, you are risking the bank taking your house, not the rental property? Sure, you would probably come out of it with money, since it's only half the equity of your house, but that's not a lot of comfort if you have to move.

2

Yes. For tax purposes, you would count the rent as income, but from that you can deduct your expenses (mortgage interest, insurance, property taxes, HOA fees, repairs, etc.). Your mortgage payment may be escrowing for taxes and insurance, so keep that in mind when calculating the income and expenses; just don't double-deduct for your taxes and insurance. There are some mortgages that have some terms where you cannot rent the home within a certain initial period, so just check your closing documents carefully to see if yours has such a condition. You will still want to carry insurance on the part of the townhome that is the structure but is not covered by the association's policy, and you will want liability insurance as well in case your tenant or one of their visitors is injured on the premises and you are sued (it happens). This is going to cost you a bit more than just a standard homeowner's policy, so keep that in mind when setting your rent level.

since the loan is being used for the rental property, yes, you can deduct the interest, taxes, insurance, utilities, repairs and other related expenses you pay on that house on the schedule E where you also MUST report your rent income

just be sure there is actual demand for rentals where you are buying or you may get stuck paying the mortgage with no income from the property

Yes. You can deduct mortgage interest on your personal residence on your return if you itemize, just like everyone else. You can't deduct mortgage interest paid on a loan for your personal residence on your Schedule E no matter what you use the money for.

IF you can get someone to give you the loan, since they are going to ask you what the money is for, and when they find out it's to purchase an investment property, they will be offering you an entirely different loan.

You cannot "roll the renter mortgage into your primary mortgage." They are two separate properties and you'll have two separate loans - and you can't intermingle what you deduct where. You can deduct mortgage interest (and other costs) on the rental but, of course, you also must declare the rental income.

First you have to report rents received as income on your taxes. Then yes mortgage interest is tax deductible. So are the property taxes and home insurance. Any repairs or maintenance fees are deductible to

Deduct investment property interest and expenses on Schedule E, as a rental expense.

IRS has publications specifically for landlords and rental expenses. Google is your friend.

The mortgage interest can only be used to offset your rental income . I can't imagine a scenario where you would be better off using rental income mortgage interest to itemize . Get the rental income down as much as you can . Good luck to you .