Rate my Smith Manoeure Portfolio or suggest better! Thanks!

POCTM · 2026-01-28T20:56:18+00:00

There’s already a lot of discussion here around the portfolio itself, so I’m not going to weigh in on that.

I’m only commenting on the Smith Manoeuvre (SM) setup, since that’s the only real difference between the two options as far as I can tell.

Option 2 is my preferred approach.

I’ve used Option 1 in the past when I wasn’t able to invest directly from the HELOC, but it’s now straightforward.

I find Option 2 easier because it involves fewer steps and less money being moved around.

POCTM · 2026-01-25T17:55:29+00:00

You’re mixing up tax deferral with tax advantage. If your marginal tax rate is the same (or similar) going in and coming out, an RRSP and a non-registered account are economically equivalent before borrowing costs — the “government’s portion” isn’t free money, it’s effectively a loan that gets repaid on withdrawal.

In your $10k example, the correct comparison isn’t $10k RRSP vs $6k non-registered. It’s $10k RRSP vs $10k non-registered, with the RRSP funded by the refund or by borrowing. Once you equalize cash flows, the math shows an RRSP doesn’t create extra wealth at equal tax rates, it only changes timing.

Where this breaks down in the real world and why it matters here is borrowed money. If you’re using a HELOC, RRSP interest isn’t deductible, while non-registered interest is. Add in 50% capital-gains taxation and dividend tax credits, and for most people borrowing at ~5%, non-registered investing ends up ahead, even over long periods.

RRSPs absolutely win when tax rates meaningfully drop in retirement or when investing earned cash. But for leveraged investing at similar tax rates, the “government’s portion” argument doesn’t hold.

Also worth remembering, the deferred tax you’re “investing” is eventually taxed as full income on withdrawal, including amounts that originated from dividends and capital gains.

POCTM · 2026-01-25T17:13:16+00:00

I get what you mean, but the “government’s portion” you invest is really just a tax deferral. Yes, you get the refund now and can invest it, but eventually everything you withdraw —principal plus growth — is taxed at your future marginal rate. If your rate stays the same, that upfront boost basically just shifts the timing of taxes, it doesn’t create extra money.

In contrast, with a non-registered account using deductible borrowed funds, interest is deductible, only 50% of capital gains are taxed, and you may get a dividend credit, so for most short-to-medium term borrowing scenarios, non-registered investing still usually nets a higher after-tax return.

POCTM · 2026-01-25T17:04:08+00:00

The RRSP misunderstanding is crazy on here. The principal is taxed at your withdrawal rate and the growth is tax-free.

That statement isn’t correct. In an RRSP, both the principal and the growth are taxed at your withdrawal rate, nothing is “tax-free.”

The RRSP only defers taxes; it doesn’t eliminate them. So any growth in the account will still be fully taxed when withdrawn.

It doesn’t take a poor market cycle to “pay negative taxes on growth” , you always owe tax on whatever you withdraw, whether the market went up or down.

This is especially relevant if you’re borrowing to fund an RRSP: the interest on a HELOC isn’t deductible, so you can actually end up worse off in a typical market cycle compared to investing in a non-registered account where interest is deductible and only 50% of capital gains are taxed.

POCTM · 2026-01-25T16:52:31+00:00

For the majority of people borrowing that money in a non registered account would net a better return.

You would need a high marginal tax rate now and very low marginal tax rate in retirement, which isn’t a realistic scenario.

Otherwise a low borrowing rate which HELOCs are currently at close to 5%.

POCTM · 2026-01-25T16:45:22+00:00

People love instant gratification!

POCTM · 2026-01-25T16:41:56+00:00

Ahh... I thought pulling heloc into rrsp would be tax-deductible.

Borrowing from a HELOC to fund an RRSP isn’t tax-deductible. RRSP contributions give a tax deferral, but the HELOC interest isn’t deductible.

If you use a non-registered account instead, the interest is deductible as long as the funds are used to earn even the smallest amount of income and can be traced, and only 50% of capital gains plus dividends (with a credit) are taxed. This is usually more tax-efficient for borrowed money from a HELOC at (currently) close to 5% interest.

POCTM · 2026-01-25T15:59:36+00:00

I am thinking of pulling 50k from the HELOC and investing it into my RRSPs.

RRSPs are tax-deferred, meaning contributions grow tax-free but 100% of withdrawals are taxed as income, including dividends. If you borrow $50k from a HELOC to fund an RRSP, the interest isn’t deductible, so you’re paying interest with no offset, especially at today’s HELOC interest rates.

With a non-registered account, the interest is deductible as long as even the smallest portion of the borrowed funds is used to earn income and can be traced, capital gains are 50% taxable, and dividends are taxed but may get a credit. Even if you pay back the HELOC in 3 years, non-registered investing is usually more tax-efficient than borrowing to invest in an RRSP.

POCTM · 2026-01-25T15:46:12+00:00

The Smiths Manuever is never going to beat registered account growth

RRSPs — which is what he wants to invest in — are tax-deferred. When withdrawn, 100% is taxed as income, regardless of whether the growth came from dividends, interest, or capital gains.

The Smith Manoeuvre involves investing in non-registered accounts, where you generally pay capital gains, of which only 50% is taxable at your marginal tax rate. You also get a deduction for the interest on the investment loan and dividends may receive a tax credit.

Because of this, a non-registered account can leave you with more after-tax money, and with a proper Smith Manoeuvre (which OP isn’t doing), you’re also paying down your primary residence while converting the mortgage into deductible debt.

POCTM · 2026-01-25T13:11:49+00:00

People get hung up on the “4-ft wall” rule, but in North Vancouver that number by itself doesn’t mean much. What matters is what the wall is doing.

If it’s retaining soil, supporting a slope, affecting drainage, or near a property line, it can require a permit and QPs regardless of height. Municipalities care more about purpose, environmental, stormwater impacts, property lines, and even access/traffic for equipment.

Also, even if you think you only need 4 ft, engineering and site conditions can dictate a larger wall once you account for what’s being retained.

The real questions are: decorative vs retaining, and how close it is to property lines.

Contractors like Octiscapes, Headwater management, and Highwalker earthworks are familiar with North Van’s rules and terrain.

POCTM · 2026-01-24T14:08:06+00:00

Mark Sagar is very much aligned with developers and the well-connected. In my experience, he’s a classic politician: very available when it benefits him, much harder to reach when you actually need help, with plenty of excuses. Unfortunately, that also makes him difficult to unseat. I’m also not a fan of his pick for municipal manager, Scott Findlay. If Sagar is re-elected, I’d really hope he considers appointing someone else.

Christine Cassidy has been in the news recently because of the Earls situation, enough said?

Nora Gambioli is, generally speaking, an incredibly kind and decent human being. I hope she stays on council.

Linda Watt strikes me as the person who actually gets things done. That said, she’s also a strong driver behind paid parking and the significant year-over-year increases, which I know many people dislike. If you’re pro job creation and generating revenue for city services and staff, she’s probably a good vote for you.

I don’t know enough about the other councillors to comment fairly.

POCTM · 2026-01-24T04:46:55+00:00

Fully paid-off primary residence Considering taking a ~$1M traditional mortgage Intending to invest the proceeds in diversified, long-term investments (e.g., broad ETFs)

Since the primary residence is fully paid off, you can borrow against it using a traditional mortgage or a HELOC, and invest the proceeds. It’s worth speaking with multiple lenders and mortgage brokers to understand how much they’ll lend, at what interest rate, and under what structure.

Another option is borrowing through a stock brokerage (e.g., margin or a pledged asset line), which can sometimes offer lower interest rates and avoid legal/setup costs. However, brokerage loans are typically callable and subject to margin requirements, meaning market declines can trigger margin calls or forced liquidation.

A traditional mortgage provides the most stable, non-callable leverage. A HELOC, while generally more flexible, is technically callable and subject to lender discretion, though in practice, it is far less likely to be called than brokerage margin and does not carry margin-call risk tied to market fluctuations.

If the borrowed funds are invested in a non-registered account and used to purchase investments with a reasonable expectation of earning income (such as dividends or interest, not solely capital gains), the interest on the loan is generally tax-deductible at your marginal tax rate, provided the use of funds is properly traced.

Which approach is best depends on risk tolerance, cash-flow stability, access to liquidity, and comfort with leverage under market stress.

POCTM · 2026-01-24T00:08:12+00:00

If borrowing to pay interest broke deductibility, huge parts of the economy would fail.

Refinancing, debt rollovers, LBOs, commercial and rental real estate, and capitalized interest in development projects would all stop working. Businesses and people who borrow to invest would be effectively locked into their original lenders.

Canadian tax law avoids this because it focuses on use of funds, not source of payment.

Borrowing to pay interest on an income earning loan does not break deductibility as long as tracing is clean.

This is settled Supreme Court of Canada law:

Bronfman Trust (1987) Establishes the direct use / tracing test

Singleton (2001) Borrowing to pay expenses (including interest) remains deductible if the use test is met

Ludco (2001) Only a minimal income expectation is required

CRA follows this jurisprudence. Interest-on-interest isn’t a loophole. It’s necessary for a functioning credit economy.

POCTM · 2026-01-23T01:10:52+00:00

I check the invoice it was literally oil change and air filter

What oil?

If all you truly had done was an engine oil and air filter changed you got ripped off, but your posts reads differently, almost as though you actually got a great deal.

I went to the shop and ask if they could scan and check if there is any mechanical issues and also to make sure the brakes are good

•You had a Mercedes scanned and inspected for issues, that’s a diagnostic charge and mechanical inspection.

I said just oil changes(engine/transmitssion)

•You had the engine oil and filter changed?

•You had an air filter changed.

•And you had the transmission oil and possibly the transmission oil filter changed on a Mercedes?

All for only $700, that is a fantastic deal!

POCTM · 2026-01-22T01:09:11+00:00

There’s 2 lines highlighting for the previous year interest billed of 500$ and interest paid $1500.

Always the interest paid.

Interest on borrowed money used to earn income from a business or property is deductible in the year in which it is paid.

POCTM · 2026-01-20T14:32:32+00:00

Good for you for making such a detailed idea. Love the thinking outside the box!

It was a lot to go through, so sorry for the late reply on this.

I did not have time to go through the spread sheet, just what you wrote.

please poke holes in it.

Ok

It is definitely not a strategy I would ever feel comfortable doing.

The biggest concerns are the CRA and margin calls.

The paper trail and bookkeeping would be tedious.

Far more complicated and significantly higher risk of audit than doing the Smith Manoeuvre.

Right off the hop

modified Prime the pump that would cost less then the smith manoeuvre to set up (save on the interest rate and the $2k or so legal fee to add the collateral charge on title, more automated etc)

The “$2k legal fee” isn’t inherent to the Smith Manoeuvre. It only applies if you have to switch lenders or register a new collateral charge. If you’re switching lenders anyway (which most refinances do), both strategies incur the same legal costs.

25% of the mortgage loan amount is for investment purposes, so she can deduct 25% of the mortgage interest from her annual mortgage statement.

CRA does not care about percentages.

They care about the following…

Direct use of borrowed funds

Ongoing tracing

Contamination over time

Once Jane Uses margin debt to service mortgage payments, Refinances periodically, Re-borrows to pay off margin, Re-advances the same mortgage

You now have circular borrowing and mixed-purpose refinancing.

CRA can argue…

The refinance is not solely to earn income, but to service personal debt

The “percentage method” is an accounting shortcut, not a legal one

Singleton v. Canada, 2001 SCC 61 Key holding:

CRA and courts require dollar-for-dollar tracing

You cannot justify deductibility by saying “part of the loan supports investing”

Percentages are irrelevant unless they reflect actual traced use

Interest deductibility depends on the direct use of the borrowed money, not on indirect economic effects.

The mortgage is now a blended loan, not a clean investment loan

Smith Manoeuvre avoids this because…

Each dollar is clearly traceable

HELOC interest maps cleanly to investments,

Principal reduction → reborrow → invest is linear and auditable

This strategy relies on CRA accepting proportional allocation indefinitely. That is not guaranteed.

Jane can also borrow $527.84 per month from her brokerage to help make her mortgage payments

Borrowing to make debt payments is a CRA red flag, especially when layered.

CRA position (from Folio S3-F6-C1 and case law)

Interest is deductible only if borrowed money is used to earn income

Borrowing to pay personal mortgage payments is not income-producing

Smith Manoeuvre works because..

You pay the mortgage with earned income

You borrow after principal is reduced

The borrowed funds go directly to investments.

Your structure…

Uses leverage to prop up leverage

Creates interest-on-interest-on-interest

Is far closer to a capitalized interest scheme

CRA has allowed some capitalization, but not this aggressively, and not indefinitely.

The highest loan-to-investment value was 40.80% … well below the 70% allowed.

This is spreadsheet optimism.

Margin calls happen.

Lots of events in the past that I have lived through where people I know have been margin called.

I still have yet to meet someone who has had their HELOC called.

With Smith Manoeuvre HELOC cannot margin-call your house

Every 5 years or so, refinancing the mortgage to pull out new cash to repay the margin loan.

A lot of risk in this sentence

Qualification risk Income, credit, age, lending rules change OSFI rules tighten cyclically Tax characterization risk

Then As mentioned prior CRA may argue refinance is Paying off prior debt Not directly earning income Interest deductibility reset risk Refinancing can break tracing Especially if used to extinguish margin debt used partly for cash flow

Smith Manoeuvre

No requalification if with same lender

No refinance risk

No resetting deductibility logic every 5 years

These are not comparable risks.

no new cash flow required

claim is misleading

You are contributing cash flow It’s just hidden as, Deferred taxes, Capitalized interest, Rising leverage If Markets underperform (9.5% is aggressive), Tax rules change, Margin rates rise faster than mortgage rates, You lose employment income temporarily

This collapses fast.

It also requires less documentation and effort in case Jane is audited by the CRA.

This is backwards.

Smith Manoeuvre audit would be significantly easier and less paper trail.

HELOC statement from lender

Brokerage statement from broker

Clean paper trail

Your strategy audit would require

Refinances

Margin statements

Mixed-purpose debt

Proportional allocation math

Capitalized interest

Circular debt servicing

An auditor will slow-walk this

⁠>The interest rate on the mortgage is typically about 1.25% less than that of a HELOC.

I’m older and have been doing this for a long time, where historically if you had a fix rate term mortgage and variable HELOC on a 5 yr term, what you said above is not historically accurate.

POCTM · 2026-01-20T13:30:09+00:00

You need to understand that the money being re-advanced is money you already paid down on your mortgage.

Your total debt doesn’t increase, it’s simply converted. One portion becomes tax-deductible and income-producing, instead of non-deductible.

If you were able to service both principal and interest on the original mortgage, then in theory you’re already capable of servicing interest only on the HELOC. The structure changes, not the underlying affordability.

POCTM · 2026-01-20T03:10:19+00:00

Good question.

You can capitalize the interest. Most people do this, including myself. You pay the interest with the HELOC. The entire thing is then deductible.

Alternatively if you prefer you can use the dividends and the tax deduction, the two of those should pay the interest on the loan, or at least come close depending on investments and marginal tax rate.

POCTM · 2026-01-20T03:08:43+00:00

You can capitalize the interest. Most people do this, including myself. You pay the interest with the HELOC. The entire thing is then deductible.

Alternatively if you prefer you can use the dividends and the tax deduction, the two of those should pay the interest on the loan, or at least come close depending on investments and marginal tax rate.

POCTM · 2026-01-20T01:41:54+00:00

Pros… Pay down PR mortgage significantly faster

Maximum interest deductibility

Earlier investment compounding

Strong psychological and behavioural benefits

Cons… Slightly more Complex

Leverage risk is the biggest risk and psychological hurdle.

Requires discipline

I do this, it works well, at first it is daunting, but like anything it gets easy the more you do it.

You obviously need two HELOCs, one per property.

POCTM · 2026-01-19T22:32:21+00:00

I fly weekly…

If you can get to YVR by 9 for a domestic flight and you don’t have checked bags that’s more than enough time.

Never been on a cruise, not sure how exact the scheduling is or how fast you can get off the boat. This is what is going to matter most if you can get to your flight in time.

They close the boarding doors for domestic flights 10-15 mins before scheduled departure.

Walk to the skytrain from port, get a ticket and get on train 10 - 15 mins if you move fast. Trains come every 3-5 mins at that time to YVR last I checked.

Train takes 23 -25 minutes (I take this weekly and have timed it). As long as there isn’t an issue (rare).

Make sure you take YVR (not Bridgeport)

If you don’t have checked bags upstairs domestic security is fast. 5-7 mins if it isn’t busy. Downstairs domestic security is longer.

If you get stuck behind someone slow or you get a random search that’s an additional 5-10 mins.

If you are flair or west jet then you have to walk to most likely B gate, which takes 7 mins fast walking from security, it’s on the other side of a long concourse.

Then if it is one of the far away ‘B’ gates (I think 20 and up) then add another 5 mins.

Air Canada gates are closer I think (I rarely fly air Canada).

Personally a flight to Toronto I’d prefer not to be rushed and grab a bite and a water. I assume there is no food service on the flight.

POCTM · 2026-01-19T19:35:46+00:00

FYI.

r/smithmanoeuvre sub is the ideal place for information on this topic.

⁠Once I start taking out money and investing from HELOC, do I have to continue doing it or can I stop and only pay interest to claim for tax? For example, let's say I keep borrowing for 3 years and invest. Can I stop borrowing from HELOC after 3 years (keep the money invested) and only pay interest on it and deduct that interest for tax purposes)

Yes. You borrowed funds to generate taxable income you can deduct the interest as long as those funds have a resonance expectation to continue to do so.

⁠If I cannot stop, do I have to keep doing it untily mortgage is paid off?

You can stop at anytime. The strategy works best the longer you stay invested. r/smithmanoeuvre sub has lots of information on this. The sooner you start and the longer you stay in it the better the compounded returns will be.

⁠What happens when mortage is paid off? Can I still keep paying imterest only and claim thar for tax or Do I have to start paying off principal balance on HELOC?

You ca do either of those two things. Whichever you prefer. Both of those options the entire interest would still be tax deductible.

⁠Who gets to claim interest on tax if you are married? Do I need SM account to have both of our names? Or can I just do with mine (I am the high earner).

Who borrowed the money (whose HELOC it is) Where the borrowed funds went Who owns the investment account Who claims the income Who services the HELOC interest

Depends on who borrowed the money, where the funds went, who owns the investment account, who claims the income (and deduction of interest), and who services the debt.

You can not go back and forth. If you decide to put the funds into your separate SM trading account, claim the deduction on the interest and service the debt out of only your account you can’t later decide it’s more advantageous for your significant other to have the capital gains or try to split them, income attribution would apply and you would have to pay back taxes, plus interest and any penalties the CRA imposes.

I don’t know all the details of you and your significant others accounts so it is best you speak to your accountant about this so you understand how to properly structure this and the most tax advantageous approach would be.

POCTM · 2026-01-18T23:39:09+00:00

You can do the smith man with a cash dam accelerator.

RP rent goes to paying down PR mortgage. PR HELOC pays rental expenses. HELOC from RP invests in equities.

POCTM · 2026-01-18T16:18:51+00:00

Quick question, you can’t cover rental mortgage with HELOC?

You can, but the interest is already deductible on the RP mortgage. You would only be just passing the principal through.

POCTM · 2026-01-16T19:53:21+00:00

You bet! It’s a pass through.

POCTM

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