Quote:
Originally posted by fille
I was wondering of anyone does this:
my financial advisor was teaching me this technique and I am planning on putting down 1/10 of my house purchase towards this manoeuvre.
Basically any investment is tax-deductible, so the technique is to take the equity in your house and put it towards an investment (say mutual funds)
for more information:
http://www.smithman.net/
I'd like to get some input before i sign some "forever" deals
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The strategy comes down to this:
- Interest paid on mortgages in Canada are not tax-deductible.
- Interest paid on loans borrowed to invest are.
- Banks allow you to borrow against the equity in your home, up to 75%.
If you don't already have at least 25% equity in your home, you can't borrow. I don't, so I'm not doing it yet.
I personally don't think mutual funds would be a good investment because they aren't very tax efficient, with the Smith Manoeuvre, you want to maximize your dividends... iShares like XTN, XFR, or XDV. This will help you pay down your mortgage faster.
Your advisor may not like this as much though, because they won't get much commission on ETFs compared to mutuals. I'm pretty biased against financial advisors though.