How To Invest Using Your Home Equity | Smith Manoeuvre Explained

Thank you. Nice summary of the book I am currently reading “ Master your mortgage for Financial Freedom” ( Smith Manoeuvre). This video makes it more understandable.

I did a similar idea. I saved the extra 15% for the first two years of our mortgage payments. Then every 2 years near our anniversary I would put down the 15% extra payment for year 1 then the day after the anniversary date, I would put the 15% extra for year 2. Then I would borrow the money to replace the funds removed from the investments so the interest paid could be tax deductible. I did this without even knowing there was such a term as the Smith Maneuver. Paid our mortgage off in 9 years this way. I always invested in good dividend paying stocks with a DRPP plan.

TIME, as you pointed out, is probably the most critical factor of whichever variation of this strategy you apply. In mid 2009 my wife and I borrowed from our HELOC, and bought several hundred shares of Microsoft, and several thousand shares of Sirius XM (which was 30 cents from $3 two years earlier). It wasn't a huge investment (given the extremely low stock prices at the time), but we were a bit nervous (using leverage for this first time). But, we were in our early 40's and knew that we had enough TIME to ride the ups and downs until retirement. We still have all those shares, and have long since paid off the HELOC. I'll begin to sell those shares, before withdrawing from RRSP and starting CPP (to minimize capital gains tax), while also adding into our TFSA's, each year, as room opens up. TIME was/is the key!

My house was paid off so in 2017 I took out a 200K mortgage on my house at 2.14% and invested it in a syndicated mortgage, paying 12% per annum. I kept it there for two years and received $48,000. My mortgage interest was only $7700 so I netted more than $40,000 before tax. I put some of it into my RRSP because I am still working. Best decision ever, apart from buying my house in Mississauga of course.

That’s what I did…. Very good strategy. I retired at age 29. Shouldn’t be afraid of good debt.

I'm glad you clarified that you can't deduct the interest if you invest in an RRSP or TFSA as this can be overlooked by people. It's important to run the numbers for yourself individually as if you do have TFSA room, it may be more advantageous to not take the interest deduction if all the income is being generated tax free. Your deduction should never outweigh your revenue from the investment so you're likely better off earning the income tax free and not getting a deduction at all. That said, if you are maximizing your RRSP and TFSA already, this is another method to maximize the amount of capital you have in the markets.

Wow. Super video as always. I’ve learned so much from you. I especially love how you added the “My Personal Strategy” section. Thanks 🙏

Great video, i wish it was a few weeks earlier, LOL. But very well done and looking at different approaches. Thanks again Adam!

Younger sub here than mentioned (35). I will look into the sm. Great advice as usual. Keep up the great work!

Hello Adam, Thank you for the response and a shout out to Lee for the followup with regards to the Capital gain implications.. The additional information is appreciated Lee.

Ask and you shall receive! Mentioned this topic on your last video and here it is! Like I expected, you made this complicated topic easy to understand. Thank you very much Adam! I really hope I can work with you one day. I’m 36 and have around 25 years left until retirement. Hopefully you’ll still be doing financial planning in 10-15 years! 🤞

I did the even lazier version of the Smith. Pay off my condo I bought 15 years ago (spent 20k when I bought for 70k), then borrowed 200k against it and put into investment account that I use margin so an even larger amount is deductible...used gains in that to buy other property that have deductions as well. Condo isn't even 80% LTV either so I will probably do another 150k on it (for total 350k) and do same process if the market crashes a bit....if not I'm good.

Awesome video! Would be great to see a follow up video with the rental property accelerator. Thanks for the great content!

Adam, this was such an important presentation, especially at the 10 minute mark discussing considerations. Also, reading many comments below was very helpful as people explain the strategy and reasoning they used. After a lot of researching this manoeuvre and the other strategy to borrow for investment to put into a non registered trading account while melting down the RRSP, the message is clear, I don't have enough "time" left to use either of these strategies. If I were in my 30's or early 40's and financially in a certain employment situation, ready for the risk to ride out the ups and downs of the stock market, then that would have been the better "time" to consider these strategies. It was a good journey to understand these strategies, helping with making the best decision so to not jeopardize retirement and into the golden years⭐️😉 Another "home run" presentation Adam. So important to listen to all your video's. ANd cheers to all the comments that add to the knowledge. 👍💯

Great explanation of this concept. Thanks

Thanks for the clear explanation! Particularly explaining the investment loan piece! There is lots of hype and videos on S.M. but none of the videos I watched explained properly the investment loan part. Keep up the good videos!!!

Helpful thank you. Interesting to hear the 2nd mortgage method that your family has used.

Cool, thanks

I really like your personal strategy especially for folks who might be needing to move within the next 3-5 years. Much easier and cheaper to break that variable rate mortgage also. I would like to hear more about how you are paying the second mortgage monthly? Are you using money from the investment? Dividends? Personal money?

Thanks for the video Adam. One thing you forgot to mention (and I may perhaps be incorrect) but the investments you make must be dividend paying investments in order to write off the interest. It does not work on investments that use a buy low, sell high approach with no dividend or distribution payouts.