The Smith Maneuver: A Step-by-Step Guide

[@n2productions]

Extremely insightful and objective take on this strategy. Thank you!

[@brandenmurphy1837]

I think its not actually accurate what you said about needing monthly gains to cover the accumulated loan interest... A key component of the SM is that you actually use the new LoC/equity from your regular mortgage payment to cover the interest and then invest the balance... Making sure your investment performs well is important but not for cashflow, you mainly want to just make sure the investment value can remain above or equal to the LoC utilized at the end... But cashflow is only a problem if the principal portion of your mortgage becomes less than the accumulated monthly LoC interest

[@benjamins8082]

I love learning so much on financial topics.

[@DeanKimPhotography]

I don't get it. 1. You borrow against your equity right but you pay interest out of it. So technically that's additional burden of payment aside from your current mortgage?

[@dustsettler4596]

Interest rates are lower than investment returns. I think he shows interest rates: 3% and investment: 7% in the video. If you borrow to invest, you're technically +4% in that example. If you can't afford the burden of payment, simply sell a part of your investment and use it to pay. Regarding taxes: You get tax deductions from interests, but one thing that isn't mentioned in this video is that you also pay taxes on your investment gains. All in all, the Smith Maneuver is good, but I would recommend in general just pay your mortgage as slow as possible, use the extra money to fill your TFSA. When you're done filling your TFSA (which is probably going to be around 90k$+), then you can start thinking about the Smith Maneuver.

[@RouRoro]

What if I wanna sell the property? Do I sell all my stocks and pay capital gain taxes?

[@holdencawffle626]

Yes. At your ordinary cap gains rate

[@k.w5804]

With abundant loc and investment loan available, SM using equity accumulated from mortgage payment is kinda outdated though.

[@MS-up1rc]

I've a confusion - after tax cost of borrowing should be higher than after tax return on investment or before tax return on investment for the strategy to be profitable?

[@CreativeBotSam]

How do you get the mortgage paid off if every time you make a payment you go and borrow the same amount? Do you cash out all the investments at some point to pay it off?

[@JuanitoDelBosque]

You can, but you don't necessarly have to. The strategy primary goal isn't to pay the mortgage faster, but rather convert the non duductible mortgage into a deductible one. After a long period of time, one should have a higher value in the investments related to the ammount borrowed = interests (leveraged investing). You actually end up with a better net value if you keep the mortgage indefinetely and you just pay the minimum when you max it. That way, you still benefit fromk your invesments growth and you can still deducts interests from the borrowed sums. Anyway most people end up paying at a rate they feel confortable with. Main reason for this is to reduce risk getting closer to retirement (inherent to the leveraged investments) .

[@dananders9676]

Would be even more meaningful if manoeuvre was spelled properly 😉

[@RouRoro]

What if I wanna sell the property? Do I sell all my stocks and pay capital gain taxes?