Smith Manoeuvre

The Smith Manoeuvre is a long-term financial strategy where you use a readvanceable mortgage (a mortgage with a built-in home equity line of credit) to borrow against your home and invest the borrowed money. Because the borrowed funds are used for investment purposes, the interest becomes tax-deductible under Canadian tax law.

How it works

Each time you make a mortgage payment, a portion goes toward paying down your principal. With a readvanceable mortgage, that paid-down amount immediately becomes available again as a line of credit. You borrow that amount back and invest it. Over time, your non-deductible mortgage debt gradually converts into tax-deductible investment debt.

For example, if your monthly mortgage payment reduces your principal by $1,000, you borrow $1,000 from your HELOC and invest it. You claim the interest on that $1,000 as a tax deduction. Repeat every month for the life of your mortgage.

The risks

This strategy involves leverage, which amplifies both gains and losses. If your investments drop in value, you still owe the borrowed money. It requires discipline, a long time horizon, and comfort with market volatility. It also only works with a readvanceable mortgage, which not every lender offers.

Why it matters

For Canadians with the right mortgage product, a stable income, and a long timeline, the Smith Manoeuvre can meaningfully reduce the after-tax cost of homeownership. But it’s not for everyone. For a detailed walkthrough of how it works and who it suits, see our Smith Manoeuvre guide.