The Smith Maneuver — does the math work for you?
A made-in-Canada strategy that converts non-deductible mortgage interest into tax-deductible investment-loan interest. Useful in the right circumstances — and risky if the numbers don’t line up. Model your situation below.
Enter your HELOC amount, its interest rate, and your taxable income. We’ll show the after-tax cost of carrying the loan and your net return at four different portfolio-return assumptions.
What is the Smith Maneuver?
Named after Canadian financial planner Fraser Smith, the strategy uses a re-advanceable mortgage / HELOC to gradually convert your non-deductible home-mortgage interest into tax-deductible investment-loan interest. Each month you pay down a slice of mortgage principal, then borrow that same slice on a HELOC and invest it in income- producing securities held in a non-registered account. The HELOC interest becomes deductible because it was borrowed to earn investment income.
Your mortgage has a HELOC component that grows as you pay down principal.
Each month, redraw the principal you just paid off and invest in eligible non-registered securities.
HELOC interest is tax-deductible because the funds are used to earn investment income.
If portfolio return > after-tax interest cost, you build wealth. If not, you lose money.
Run the numbers
Adjust the inputs — the table updates live.
Net return at common portfolio returns
The break-even return is the effective after-tax cost. Anything above that builds wealth.
| Portfolio return | Gross income | After-tax interest | Net annual |
|---|
Calculating…
Run it past us before you set it up.
Implementation depends on your mortgage product, the right re-advanceable structure, the investments you choose, and the documentation needed for CRA. A 30-minute chat tells you whether it’s a fit.
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