What is a Tax Deductible mortgage?

Tax deductible mortgages are possible. Are you missing out on substantial savings? Cash that could help you pay off your mortgage faster, make value-increasing upgrades in your home, or offer a little extra money to put away for your family?


In Canada, if you borrow for the purpose of investing, where you expect to earn income, the interest on that loan qualifies as being tax deductible mortgage. For example, if you take out a line of credit to increase your investment portfolio, whatever interest paid throughout the year on that loan is a tax deduction.


Mortgages, on the other hand, are not tax deductible. Because of this, Fraser Smith designed a wealth building strategy, “The Smith Manoeuvre,” which converts the interest on your mortgage into an income tax deduction. So–is there a tax-deductible mortgage?


Let’s say you want to invest your annual bonus – $15,000 – in mutual funds. Rather than investing the funds directly, the Smith Manoeuvre instructs you to use the $15K to pay down your mortgage principle, than re-borrow the funds against your house to invest. In this case, because the $15K was effectively borrowed for the purpose of earning income, it qualifies as being tax deductible.

The Smith Manoeuvre then goes one step more & advises to use that tax refund cheque to further pay down your mortgage. This process is repeated until your mortgage is fully paid off, leaving you with a considerable investment portfolio & tax-deductible investment loan.


Of course, this strategy does involve an increased level of risk & is certainly not for everyone. The purpose of this page is simply to illustrate the tax deductible MORTGAGE & inform clients that this option is available. Implementing such a strategy should only be done after consulting with an accountant or financial adviser.


Tax Deductible Mortgage: Is It Possible for ME?

In certain circumstances a tax deductible mortgage IS possible. The question is—are you missing out on the large savings that a tax-deductible mortgage can bring? If you qualify for this savings, it is certainly worth pursuing, as the savings is substantial. With this savings you could improve the value of your home with upgrades, pay off your mortgage faster or reinvest the money in your family via RESPs or RRSPs.

Contact us today for a case-by-case assessment that can tell you if you’re missing out on the benefits of a tax-deductible mortgage.