REVscene Automotive Forum - View Single Post - Smith Manoeuvre: make your mortgage tax-deductible

Wetordry · 01-31-2007, 11:35 AM

After reading this again, the maneouvre seems probable....but i question the reality of it.

Using Downlow's example:

An example:

- House worth 400k
- You own 200k worth of equity, and owe 200k on the house
- You have 200k in investments, outside of your RRSP.

The goal is to change this to:

- House worth 400k
- You own the house, no mortgage
- You have a line of credit for 200k
- You have 200k in investments, outside of the RRSP

1) An average GVRD house is upwards from 650k

2) Chances of your house being 50% paid off before you are 40 years old? (ie young enough to be able to accept financial risk?)

3) Using the LOC to cover the mortgage in the above example would mean that the person must be qualitfied for a 200k LOC minimum.... now how many people you know have 50% equity in their house as well as have 200k LOC?

4) If #3 is attainable, and you have a 200k line of credit, you must be pretty rich. There are a whole bunch of investment options other than the Smith maneouvre to help you make wads of cash.

If I was in that situation, i'd put the 200k into condos or real estate elsewhere. You would end up with 2 real estate properties waiting to appreciate in value.

01-31-2007, 11:35 AM	#13
Wetordry RS controls my life! Join Date: Jan 2002 Posts: 713 Thanked 42 Times in 32 Posts Failed 5 Times in 5 Posts	After reading this again, the maneouvre seems probable....but i question the reality of it. Using Downlow's example: An example: - House worth 400k - You own 200k worth of equity, and owe 200k on the house - You have 200k in investments, outside of your RRSP. The goal is to change this to: - House worth 400k - You own the house, no mortgage - You have a line of credit for 200k - You have 200k in investments, outside of the RRSP 1) An average GVRD house is upwards from 650k 2) Chances of your house being 50% paid off before you are 40 years old? (ie young enough to be able to accept financial risk?) 3) Using the LOC to cover the mortgage in the above example would mean that the person must be qualitfied for a 200k LOC minimum.... now how many people you know have 50% equity in their house as well as have 200k LOC? 4) If #3 is attainable, and you have a 200k line of credit, you must be pretty rich. There are a whole bunch of investment options other than the Smith maneouvre to help you make wads of cash. If I was in that situation, i'd put the 200k into condos or real estate elsewhere. You would end up with 2 real estate properties waiting to appreciate in value. Last edited by Wetordry; 01-31-2007 at 11:39 AM.