Smith Maneuver

Ever had the dream of retiring rich and retiring young?  You and me are probably alike as we are working our blue/white collar jobs, living pay check to pay check and paying off that life long mortgage. In a lot of countries, housing prices have gotten astronomical that people live to pay their mortgage.  After the mortgage is paid off most people are generally only left with whatever work pension they have and maybe some RRSP.  For most people pension, RRSP, CPP, and old age pension may not be enough or maybe they were forced into early retirement or just sick of their jobs. Where am I getting at you wonder?

WELL HERE'S ANOTHER GET RICH QUICK SCHEME FOR 9999.99...just kidding.  There are things called mortgage strategies and Smith Maneuver is one of them.  Ever dream of writing off that interest you pay for 35 years, imagine how much money you would save.  Never thought you could do that did you?  This technique only works in Canada, sorry American readers.  The goal of the Smith Maneuver is to borrow money invest in lets say stock market or something income producing, you can deduct the interest from that loan off taxes.  Now what in the world does this have to do with real estate?  Well you need equity to borrow against, that's where your house comes in.  So you borrow money and use your home that you are mortgaging as equity and used the borrowed money to buy stocks.  The goal for this strategy to work is you must earn as much as the percentage that you are paying for your mortgage.  So at the end of the 35 year mortgage you have paid off your mortgage, plus you have all that borrowed money invested which the portfolio should be higher than what you borrowed. For example you borrowed $400,000 because that's how much interest you paid and that was invested and at the end of the 35 years you made $600,000.  You take out $400,000 and pay off the loan and now you are left with $200,000.  Now I say to you, would an extra $200,000 make your retirement that much flexible and relaxing?

G.