The Smith Manoeuvre converts your non-deductible mortgage interest into tax-deductible HELOC interest by investing the equity you pay down each month. Over 15–25 years, it can build significant additional wealth. This calculator projects your net gain accounting for HELOC interest paid, tax deductions received, and investment portfolio growth.
Project the long-term wealth gain of converting non-deductible mortgage interest into deductible HELOC investment interest.
Model assumption: HELOC interest is paid monthly from separate income — it is not capitalized back onto the HELOC. If you cannot service HELOC interest from cash flow, your actual net cost will be higher than shown.
Enter your mortgage balance, mortgage rate, HELOC rate, marginal tax rate (select your province and income bracket from the dropdown), expected investment return, and projection horizon (10–25 years). The results show your projected portfolio value, tax savings, HELOC interest cost, and net wealth gain versus not doing the Smith Manoeuvre.
The Net Wealth Gain is the additional wealth built versus simply paying down your mortgage without investing. It's the portfolio value minus the net HELOC cost (HELOC interest paid minus tax savings received). This is what the strategy actually earns you above a conventional approach.
Tax Savings accumulate because HELOC interest used to earn investment income is fully tax-deductible. As your HELOC balance grows (matching the principal you've paid down), the annual deduction grows too. At a 43% marginal rate, every $10,000 in HELOC interest generates $4,300 in tax savings — a meaningful subsidy on your investment borrowing cost.
The Break-Even Point is the year when the strategy's cumulative gains first exceed its cumulative costs. Before that point, you're ahead on the mortgage but behind on net wealth. After it, the compounding of the investment portfolio and tax deductions outpaces the HELOC interest drag. Most Smith Manoeuvre projections show a break-even of 3–7 years, with gains accelerating sharply thereafter. This strategy requires a readvanceable mortgage — confirm your lender supports it before proceeding.
As you pay down your mortgage, you immediately re-borrow the same amount from a readvanceable HELOC and invest it. The HELOC interest becomes tax-deductible (used to earn investment income), while the non-deductible mortgage shrinks. Over time you convert your whole mortgage to deductible debt.
You need a readvanceable mortgage (where the HELOC limit increases as you pay down the mortgage). TD FlexLine, BMO Homeowner ReadiLine, Scotiabank STEP, and National Bank All-In-One support this. Most monoline lenders do not.
Investment returns are not guaranteed. If your portfolio drops and you can't service HELOC interest from other income, you may need to sell investments at a loss. This strategy requires discipline, cash flow, and ideally guidance from a financial advisor and tax professional.
Tax savings depend on your marginal tax rate and the HELOC balance. A homeowner in a 43% tax bracket borrowing $200,000 at 5.45% pays $10,900/year in HELOC interest, saving roughly $4,687/year in taxes. This calculator computes your specific numbers.
Explore current rates from 16+ Canadian lenders, or read our guides to understand your options.