Smith Manoeuvre projection
Model your whole Smith Manoeuvre (also spelled Smith Maneuver) plan for Canada, year by year: how fast the mortgage is repaid, the deductible interest and tax refunds you accumulate, and your net worth versus a plain mortgage. Compare up to three strategies side by side — a reliable alternative to a fragile Smith Manoeuvre spreadsheet.
Home & mortgage | ||
|---|---|---|
| Home value ($)Your home's appraised value from the lender. It sets the 65% borrowing ceiling used in the projection. | ||
| Current mortgage balance ($)The amount still owing on your mortgage. Can't exceed the home value. | ||
| Mortgage rate (%)Your annual mortgage interest rate, used to split each payment between interest and principal. | ||
| Remaining amortization (yr)Years left until the mortgage is paid off at your regular payment. This sets the payment amount. | ||
HELOC & initial investment | ||
| HELOC rate (%)The annual interest rate on your home-equity line of credit. | ||
| Initial draw ($)An amount to borrow and invest up front. Only the room under the 65% ceiling can be used: 65% of home value minus your mortgage. | Room: $120,000 | |
Investment return | ||
| Price growth /yr (%)The annual price growth you expect before tax, excluding dividends. | ||
| Dividend yield (%)Cash dividends paid each year, on top of price growth. Total return = price growth + dividend yield. | ||
Tax rates | ||
| Marginal tax (%)Your tax rate on the next dollar of income. A higher rate makes the interest deduction worth more. | ||
| Tax on dividends (%)Your estimated tax rate on dividends, applied before they're spent or reinvested. | ||
Cash-flow strategy | ||
| Portfolio income useWhat happens to cash distributions paid by the investment. | Portfolio distributions are added directly to the investment. | |
| Tax refund useWhat happens to a net year-end tax refund after tax on distributions is deducted. | A net tax refund reduces the mortgage, then the new room is borrowed and invested. | |
| Borrow to cover HELOC interestAdds interest to the HELOC when room is available; any shortfall comes from cash. | ||
How this is calculated
Each scenario is projected month by month across the original amortization period, against its own plain-mortgage baseline. The remaining amortization sets the equal mortgage payment; each payment then has a changing interest/principal split. Principal repayment frees room that can be re-borrowed, keeping mortgage + HELOC within 65% of home value (the current OSFI re-advanceable cap for a new borrower). If you start with a mortgage above 65% LTV, the HELOC stays at $0 until it amortizes to 65%.
- Monthly rates = annual ÷ 12; total return = price growth + dividend yield.
- Dividends are paid quarterly and flow gross during the year; capital-gains tax on a sale isn't modelled.
- Tax settles once a year. The deductible-interest refund is netted against the tax on that year's dividends. A net refund is deployed per Tax refund use (prepay & re-borrow, reinvest, or keep as cash); a net amount owing is paid from cash.
- Withdrawn dividends and dividend prepayment/re-borrowing happen immediately in the dividend month; the tax on them is settled at year-end.
- Net cash flow = cash in (withdrawn dividends, and a cash refund) − cash out (HELOC interest paid from cash, and any net tax owed).
- Capitalizing interest adds each month's HELOC interest to the line instead of paying it from cash — it has first claim on the room freed by principal. If a month's freed room can't cover the interest, the shortfall is topped up from cash; only room left over after covering the interest is re-borrowed to invest.
- Assumes 100% deductible HELOC interest and a fresh setup with no pre-existing HELOC.
- The Baseline column is the plain mortgage with nothing invested. Net worth is compared at the end of the original amortization, so both sides are measured on the same date; Difference vs plain mortgage is that same-date gap. Mortgage paid off in reports separately how much sooner the strategy clears the mortgage.
- Estimate only — not tax or investment advice.
This projects the plan under your assumptions. Your actual deductible interest drifts with return of capital, partial sales, and any personal use of the line — the app tracks the real numbers and produces an audit-ready report.
Just want the quick “is it worth it?” answer? Try the break-even calculator →
More reliable than a Smith Manoeuvre spreadsheet
A spreadsheet is fine for the one-time “is it worth it?” question. But once you actually start, the deductible portion of your debt changes with every borrow, purchase, sale, distribution, and capitalized interest charge — and that's where spreadsheets quietly break. This projection keeps the re-advanceable limit, the capitalized interest, and the tax math consistent across every month, so the numbers you compare are actually comparable.
It's an estimate to help you plan, not a guarantee. When you're ready to run the real thing, the Deductible Interest Tracker keeps the deductible amount correct from your actual transactions and produces an audit-ready report.
Learn how the strategy works
- The Smith Manoeuvre, explained — how the whole strategy works
- How interest deductibility works — the CRA tracing rule (Income Tax Folio S3-F6-C1)
- Interest capitalization — paying interest by borrowing more
- The full Guide — every scenario, explained
Ready to run the real thing? Track your actual deductible interest from your transactions and generate an audit-ready report.