The Smith Manoeuvre,
Tax Deductible Mortgage
Here we will outline The Smith Manoeuvre concept. It is about how to utilize home mortgage and
available equity to become debt free sooner. Then we will go more into details.
The idea is very simple and creative. A mortgage holder takes advantage of Canadian tax system
that allows writing off interest payable on investment. How to get such a loan? Using your home
equity. Many Canadians with paid down mortgages are sitting with tens of thousands of dollars
tied up in home equity. That equity is a valuable asset and can provide for an investment opportunity.
Basically, a mortgage holder will extract free equity through a specific mortgage product, which allows
borrowing money from the home equity with each mortgage payment, and reinvest in form of dividend paying
stocks or mutual funds. This income and annual tax refund are injected back into the fixed mortgage and
borrowed back to buy some more investments. Mortgage holder will continue this cycle year after year.
This will allow paying down the mortgage much quicker, while accumulating a large income generating
investment portfolio.
This is a simple way of describing The Smith Manoeuvre strategy. Still confusing? Just keep reading.
The Smith Manoeuvre is explained here in details.
