The Smith Manoeuvre calculator that shows you the honest number
Project the conversion of your mortgage into tax-deductible investment debt, month by month, in exact cents — including what you'd have if you invested the same out-of-pocket cash without borrowing. The difference between those two lines is the real case for the strategy. If you want the arrangement before the arithmetic, the Smith Manoeuvre is written out account by account.
What is the Smith Manoeuvre?
The Smith Manoeuvre is a Canadian strategy that converts non-deductible mortgage debt into deductible investment debt. Each mortgage payment’s principal portion is re-borrowed from a readvanceable credit line and invested in income-producing assets, so the interest on the re-borrowed amount is claimed under paragraph 20(1)(c) of the Income Tax Act.
Your numbers
Your conversion, month by month
Assumptions & method (read this — it's where calculators differ)
- Mortgage compounding. Canadian fixed mortgage: semi-annual compounding, monthly factor (1 + r/2)^(1/6) − 1.
- Facility. HELOC compounds monthly (annual rate / 12).
- Refund timing. Tax refunds are credited monthly at the marginal rate. In reality they arrive with the annual return — a timing difference this projection smooths.
- Fair baseline. Invest the identical out-of-pocket outlay (HELOC interest net of refund) at the same return, with no borrowing. Net advantage is the strategy net worth minus this baseline fund — leverage priced against its alternative.
- Not modeled: Investment-income taxation along the way (dividends, distributions, realized gains); Account, fund, and borrowing fees; Rate changes and prepayment changes over the projection horizon; Accelerated variants (refund-prepay, dividend-prepay); Québec abatement and province × bracket tax detail (single flat marginal rate is used).
A worked example: the default scenario
For a $500,000 mortgage at 4.50% with 25 years of amortization remaining, a 6.45% HELOC, a 43.41% marginal rate and a 6.00% expected return, the projection converts $500,000 of non-deductible mortgage debt into deductible HELOC debt over those 25 years. It pays $331,221 of deductible interest, which returns $143,783 in cumulative tax refunds, and ends with a $1,007,600 portfolio against the $500,000 still owed on the HELOC. Investing the same out-of-pocket cash without borrowing would have grown to $311,860, so the net advantage of the strategy under these assumptions is $195,741. The level mortgage payment is $2,767 a month.
| Year | Mortgage | HELOC (deductible) | Portfolio | Baseline fund |
|---|---|---|---|---|
| 1 | $488,858 | $11,142 | $11,451 | $223 |
| 2 | $477,208 | $22,792 | $24,130 | $888 |
| 3 | $465,029 | $34,971 | $38,136 | $2,041 |
| 4 | $452,295 | $47,705 | $53,575 | $3,734 |
| 5 | $438,982 | $61,018 | $70,562 | $6,020 |
| 6 | $425,062 | $74,938 | $89,219 | $8,960 |
| 7 | $410,510 | $89,490 | $109,678 | $12,615 |
| 8 | $395,295 | $104,705 | $132,080 | $17,055 |
| 9 | $379,388 | $120,612 | $156,575 | $22,354 |
| 10 | $362,757 | $137,243 | $183,324 | $28,591 |
| 11 | $345,369 | $154,631 | $212,501 | $35,851 |
| 12 | $327,190 | $172,810 | $244,291 | $44,228 |
| 13 | $308,184 | $191,816 | $278,892 | $53,820 |
| 14 | $288,313 | $211,687 | $316,516 | $64,734 |
| 15 | $267,537 | $232,463 | $357,389 | $77,085 |
| 16 | $245,816 | $254,184 | $401,756 | $90,996 |
| 17 | $223,107 | $276,893 | $449,874 | $106,600 |
| 18 | $199,364 | $300,636 | $502,023 | $124,039 |
| 19 | $174,541 | $325,459 | $558,498 | $143,467 |
| 20 | $148,588 | $351,412 | $619,618 | $165,046 |
| 21 | $121,455 | $378,545 | $685,721 | $188,954 |
| 22 | $93,086 | $406,914 | $757,170 | $215,379 |
| 23 | $63,427 | $436,573 | $834,353 | $244,524 |
| 24 | $32,417 | $467,583 | $917,683 | $276,607 |
| 25 | $0 | $500,000 | $1,007,600 | $311,860 |
Computed at build time by @acru/strategy-sim under assumption set sm-2026.1 — the same engine, and the same versioned methodology, the interactive calculator above runs on.
The projection is the easy part. The records are the work.
Deductibility survives on tracing — every re-borrowed dollar tied to the investment it funded, every year closed in a form your accountant can check. Join the waitlist and we will send you a permalink to every projection you run.
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Smith Manoeuvre — questions this calculator raises
Is Smith Manoeuvre interest tax deductible?
Interest qualifies for deduction when the borrowed money is used to earn income from a business or property and the use can be traced. Tracing is the operative word: commingled funds and personal-use draws contaminate deductibility, which is why record-keeping is the strategy’s real work.
Do I need a readvanceable mortgage?
A readvanceable mortgage is a Canadian product that combines a mortgage with a credit line whose limit re-advances as mortgage principal is repaid. Every principal payment frees the same amount of borrowing room, which is the mechanism the Smith Manoeuvre re-borrows and invests. Common examples are RBC Homeline, Scotia STEP and Manulife One.
Also sold as BMO ReadiLine, TD FlexLine, CIBC Home Power Plan, NBC All-in-One, and the Desjardins Versatile line.
Why does your net advantage look smaller than other calculators?
Because it is net. Most calculators show the portfolio and stop. This one subtracts the HELOC you still owe and what your out-of-pocket cash would have earned unlevered. What remains is the honest case — usually still substantial, and now defensible.
Is the Smith Manoeuvre risky?
It is leveraged investing: you carry investment debt against your home while markets move. Rates can rise faster than returns, the sequence of those returns matters, and discipline under a drawdown matters more. This page shows arithmetic under constant assumptions, not a promise.