The Smith Manoeuvre

This is the investment strategy promoted by financial planner turned author, Fraser Smith to "make your mortgage tax deductible." Smith wrote the book in 2002 after promoting the concept through credit unions hungry to sell home equity lines of credit.

Simply put, you, as a home owner stop paying down your mortgage. Any principal repayment is, instead, reborrowed on a home equity line of credit. These funds are used to purchase mutual funds. Over time, your home mortgage is replaced by a tax-deductible line of credit. Bottom line, you never pay off your mortgage.

Fans of the plan argue that the Smith Manoeuvre creates wealth quicker than waiting to pay off your mortgage before investing in RRSPs. Truth is, most of us don't have the stomach to borrow against our house to buy investments. For good reason. Almost all of us will bail out of an investment like this if we see it decline in value by 10%.

Let's look at the last 10 years as an example of how the Smith Manoeuvre might have worked out.


  • home owner enters into Smith Manoeuvre 10 years ago
  • invests a total of $52,151
  • pays 6% on money borrowed


  • portfolio loss of almost $4,400 after 10 years
  • maximum loss position exceeded $12,000 in Jan 2009

Smith Manoeuvre – 10 Years Later

Smith Manoeuvre 10 Years Later

Using borrowed money to finance the purchase of securities involves greater risk than using cash resources only. If you borrow money to purchase securities, your responsibility to repay the loan and pay interest as required by its terms remains the same even if the value of the securities purchased declines. Please speak to your legal, tax and banking professionals for advice before embarking on this strategy.

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