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The Smith Manoeuvre converts non-deductible mortgage debt into deductible investment debt by borrowing to invest, using a readvanceable mortgage. It is a genuine strategy with genuine risks, it suits a narrow set of people, and it is not something to begin because you read about it once.
Stephen Green, Mortgage BrokerWaterloo Region · serving all of Ontario
Nearly 30 years in Canadian financial services
General information about the smith manoeuvre in Ontario. Everything is subject to full qualification, lender approval and final terms.
Six steps, repeated for a very long time. Nothing here is clever or hidden — the whole strategy is one ordinary tax principle applied patiently.
A mortgage with a credit line attached, where the credit line grows as the mortgage principal comes down. Not every lender offers one, and not on every existing mortgage.
Each regular payment reduces the mortgage and opens the same amount of room on the attached credit line.
The freed room is drawn and invested — by you, with your own advisor. The investment decision is never mine to make.
Because the borrowed money is used to earn income, the interest on that portion may be deductible. Whether it is depends on CRA rules and on how the funds are actually used.
If a refund results, it is applied to the mortgage principal, which frees more room, which repeats the cycle.
This is measured in decades, not terms. It is not a manoeuvre you perform once.
Most people who ask about this strategy should not be doing it. That is not a sales filter — it is what the conditions below actually rule out.
A readvanceable mortgage, with the credit line and the advance behaving the way the strategy needs. Most mortgages are not this, and changing to one has its own cost.
Enough equity for the structure to do anything, and income stable enough to carry both the mortgage and the borrowing if markets fall.
Decades. Someone planning to sell, move or retire inside a few years is usually the wrong candidate.
Not a questionnaire answer. The borrowing is secured against your home, and you have to be able to sleep through a bad year.
Not optional, and not me. The investing and the tax treatment belong to people licensed for them.
“It sounds clever” is not a plan. If you cannot say what you want this to do for you, that is the conversation to have first.
This section is not a disclaimer at the bottom of the page. It is the part most worth reading, because it is the part that decides whether the rest applies to you at all.
Borrowing to invest amplifies the result in both directions. A fall is a fall on borrowed money, and the borrowing does not shrink because the investment did.
This is not an arm’s-length investment loan. The security is the roof over your head.
It depends on how the borrowed funds are used, and it can be lost by doing the wrong thing with them. It is not a feature of the mortgage.
What you pay to carry the investment portion is not fixed for the life of the strategy, and the strategy is long.
Not by me, not by the structure, not by anyone. Nothing on this page is a projection and there is deliberately no calculator on it.
Tracking, record-keeping and a more complicated return, permanently. Some people decide that alone is reason enough not to.
I am a mortgage broker. I can arrange and structure the mortgage the strategy runs on, and I hold the Smith Manoeuvre certification, which means I was taught the mechanics properly rather than picking them up from a forum.
I do not give investment advice and I do not give tax advice. Those are separate licences held by separate professionals, and anyone offering you all three at once is worth a second look. If you do not already have an advisor and an accountant, that is something I can help with — The Collective exists for exactly this.
Both run on a readvanceable mortgage, so they get confused constantly. The goals are different. The Smith Manoeuvre converts non-deductible mortgage debt into deductible investment debt by borrowing to invest. RateShield Advance restructures the mortgage debt itself and involves no investing at all.
If what you actually want is the second one, read about RateShield Advance instead.
No. It relies on an ordinary principle: interest on money borrowed to earn income may be deductible, while interest on money borrowed to buy a home is not. The strategy gradually changes the purpose of the borrowing. Whether any particular arrangement qualifies is between you and your accountant.
Often not. It needs a readvanceable mortgage that behaves a specific way, and most mortgages are not that. Finding out is a short conversation, not an application, and there is no credit check to have it.
There is no threshold anyone can publish honestly, because it depends on your equity, your income, your horizon and your tolerance for risk. Anyone who gives you a number without asking those four things has not asked enough.
That is the claim you will see elsewhere and it is not one I will make. What the structure does is change the character of the debt over time. What that is worth to you depends on investment returns nobody can promise and on tax treatment that is not a mortgage broker’s to rule on.
No. Both use a readvanceable mortgage, which is why they get confused. The Smith Manoeuvre borrows to invest and converts the debt into deductible investment debt. RateShield Advance restructures the mortgage debt itself and involves no investing.
If you have been reading about this and want to know whether it applies to you, ask. You will get a straight answer, including — often — that it does not.