Smith Maneuver & Debt Swap
Convert non-deductible mortgage interest into deductible investment-loan interest by changing what the borrowed money does.
Smith Maneuver
As you pay down your mortgage, re-borrow the principal and invest in income-producing non-registered assets. The interest on the re-borrowed portion may become deductible.
Owns the answer: Accountant + investment advisor.
Debt Swap (Rental → Primary)
Restructure so mortgage interest sits against the income-producing rental property — where it is deductible — rather than the primary residence, where it is not.
Owns the answer: Accountant (legal trace required).
Concrete Walk-Through — $50,000 Borrowed
Common assumptions: 4% mortgage rate, 8% assumed return, 20-year horizon, 43% marginal rate. Illustrative only.
Non-Registered, Income-Producing
- $50,000 invested in eligible income-producing assets
- Mortgage interest at 4% may be deductible → net cost ~2.28%
- Annual interest deduction on $50K @ 4% = $2,000 → refund ≈ $860/yr
- $50K @ 8% × 20 yrs ≈ $233,000 (less annual tax on distributions)
Disclaimer: Interest deductibility requires strict CRA tracing — separate accounts, no commingling, investments must produce income. A CPA must confirm eligibility before implementation.
⚠️ Non-negotiable rules
- Investments must produce income (dividends, interest, rent)
- Keep separate accounts — never commingle borrowed and personal funds
- Trace every dollar; CRA requires clean documentation
- Work with a CPA before the loan funds, not after
Model the Refinance That Funds It
Use the refinance calculator to see what accessing equity would look like for your specific mortgage, debts and property value.
Mortgage Refinance Calculator
Calculate potential savings and benefits of refinancing your mortgage
Current Mortgage Details
Existing Debts
Add loans, credit cards, and credit lines to see potential cash flow improvements
New Mortgage & Cash Out
Maximum available based on 80% loan-to-value of your home ($NaN)
Typical: $2,500 - $5,000 (added to cash out amount)
The Smith Maneuver and Debt Swap are advanced tax strategies. Conceptual benefits shown are not guaranteed dollar outcomes. Borrowing to invest amplifies both gains and losses; the loan remains repayable regardless of investment performance. Engage a licensed CPA, registered investment advisor, and licensed mortgage professional before acting.
Ready to Talk Structure?
We can model the refinance, HELOC or second mortgage that supports the strategy your CPA and advisor confirm is right for you.