Using a Tax-Aware Borrowing Strategy

Jon and Rebecca purchased their first home in California in 2016 and refinanced their mortgage in 2021. They received news that they were expecting twins and were looking for a bigger space. However, Jon and Rebecca were concerned about buying a new home and losing the below-market interest rate on their current mortgage. After voicing these concerns to their banking team, they were connected to their J.P. Morgan mortgage specialist, who provided in-depth information regarding the Tax-Aware Borrowing strategy. Jon and Rebecca purchased the new home in cash, took out a $3 million cash-out mortgage, and used the proceeds to invest in taxable investments. This allowed them to deduct the entirety of the mortgage using the investment interest deduction—compared to the standard mortgage deduction, which is only applicable to the interest on the first $750,000 of mortgage indebtedness.

After closing on their home in cash and using the Tax-Aware Borrowing strategy, they were able to achieve significant deductions, which significantly lowered the effective rate of their mortgage.

All case studies are shown for illustrative purposes only and are hypothetical. Any name referenced is fictional and may not be representative of other individual experiences. Information is not a guarantee of future results.

JPMorgan Chase & Co., its affiliates, and employees do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal and accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transaction.

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