Smith Manoeuvre
A Canadian tax strategy that makes mortgage interest tax-deductible by systematically converting non-deductible mortgage debt into deductible investment loan debt via a readvanceable mortgage.
The Smith Manoeuvre, developed by Fraser Smith, is a Canadian tax strategy that uses a readvanceable mortgage to systematically convert non-deductible mortgage interest into deductible investment loan interest. As you pay down your mortgage principal, the HELOC portion of your readvanceable structure grows. You draw on the HELOC to invest in income-producing assets (typically a non-registered investment portfolio), making the HELOC interest tax-deductible. Over 25 years, this can produce meaningful tax savings and build a separate investment portfolio alongside your mortgage paydown. Risks include market risk on the investments, interest rate risk on the HELOC, and tax complexity that requires professional advice.
Related Terms
A combined mortgage + HELOC product under one collateral charge, where principal paydown on the mortgage automatically increases the HELOC limit.
A revolving credit line secured against your home's equity, priced as Prime plus a spread — typically 0.50% to 1.00% above Prime.