The Smith Manoeuvre And Manulife One

Learn how the Smith Manoeuvre works and how Manulife One can help you turn mortgage payments into a wealth-building strategy.

What Is The Smith Manoeuvre?

The Smith Manoeuvre is a Canadian financial strategy that helps homeowners convert their non- deductible mortgage interest into tax-deductible investment loan interest- potentially building wealth faster while reducing your tax burden.

It works by re-borrowing the equity in your home, as you pay down your mortgages, and investing those funds in income-generating, eligible investments (like stocks, mutual funds, or ETFs). The interest on the investment loan becomes tax-deductible.

How The Smith Manoeuvre Works – Step by Step:

1- Make Your Regular Mortgage Payment

Every payment reduces your mortgage principle and builds equity

2- You Re-Borrow that Equity

You immediately access the newly available equity using a revolving line of credit (LOC)

3- You invest the Borrowed Funds

The reborrowed money is invested in a non-registered investment account in your name

4- You Deduct the Interest

Interest on the investment loan becomes tax-deductible (when invested appropriately)

5- You Recycle the Tax Refund

Tax refunds can be used to make additional lump-sum mortgage payments, accelerating the cycle.

Why Manulife One is the Ideal Product for the Smith Manoeuvre

The Manulife One mortgage is an all-in-one banking and borrowing solution that combines your mortgage, line of credit, and spending into a single account.

It stands apart from traditional mortgage + LOC setups in several ways, making it perfectly aligned with the Smith Manoeuvre.

Chart describing the benefits of having a Manulife One mortgage vs. a traditional mortgage with the Smith Manoeuvre

How Manulife One Works (At A Glance)

Manulife One merges your mortgage, line of credit, and chequing account into a single, flexible account.

Your income is deposited directly into the account and immediately reduces your interest costs.

As you pay down your balance, you can re-access those funds (up to your credit limit) whenever needed.

Features:

Paycheques reduce interest immediately
Withdraw any paid-down equity at any time
Customize your setup with sub-accounts (eg. isolate investment borrowing)
Interest-only payments available on investment sub-accounts
Acts like a giant chequing account + line of credit + mortgage combo

How To Use The Manulife One For the Smith Manoeuvre

1- Set up a Dedicated Sub-Account

Create a sub-account specifically for the Smith Manoeuvre. This isolates the investment loan for easier tax tracking.

2- Deposit Your Paycheque Into Manulife One

Your income immediately reduces your interest charges (since it offsets the mortgage balance)

3- Make Your Monthly Mortgage Payment

As the principle reduces, your available credit increases

4- Borrow from the Investment Sub-Account

Transfer funds from this sub-account to your investment account, and document everything clearly.

5- Invest & Track

Work with your financial advisor to invest the funds appropriately in eligible, income-generating investments.

6- Deduct Interest Annually

Come tax time, your accountant will help claim the interest as a deduction (ensure you keep your statements and investment records)

7- Recycle Tax Refunds

Use any refund to make lump-sum payments back onto the mortgage or into investments

A Few Important Notes

The Smith Manoeuvre MUST be done properly to qualify for interest deductibility. Investments must have a reasonable expectation of income (ie. dividends or interest).
You should work with a knowledgeable mortgage professional, financial advisor, and accountant to ensure it’s executed and tracked correctly.
Like all leveraged strategies, there is risk. Investment returns are not guaranteed, and the strategy involves borrowing.