Smith manoeuvre · simulation tester
Change any assumption below and hit Run to regenerate the full 25-year projection. HELOC cap uses original appraisal; investment return is total (incl. dividends).
Illustrative only — not financial advice. Uses Canadian semi-annual compounding and simplified 65 %/80 % HELOC caps.
HELOCs are variable. A BoC tightening cycle can add $1,000+/mo in interest once the HELOC exceeds $600 k. Stress-test at HELOC rate + 3 % and keep a 6-month cash buffer.
You're borrowing to invest. A 40 % crash leaves the HELOC intact while the portfolio craters. Never sell during a crash — the strategy only works if you hold through full cycles.
A 15 % price drop can push your HELOC balance over the new 65 % cap, triggering a bank freeze or forced repayment. Keep a buffer below the cap; hold liquid reserves outside the leveraged portfolio.
Job loss or disability means servicing both mortgage and HELOC interest simultaneously. Maintain 6–12 months of total housing costs in cash before starting, and carry disability/life insurance.
The strategy depends on CRA allowing interest deductions on investment loans. If capped or removed, the after-tax math collapses. Don't build a plan that requires the deduction to survive.
Any non-investment draw (renovation, car) breaks the deductibility chain and creates a CRA audit risk. Use a dedicated sub-account exclusively for Smith draws — never touch it for anything else.
If your portfolio yields less than the after-tax HELOC cost, the spread goes negative. Favour Canadian dividend-paying equities with meaningful yield; reassess the spread annually.