Tool · Mortgage conversion

Smith Manoeuvre and Cash Damming Calculator

In brief — Enter your principal residence value, mortgage balance and rates: the tool simulates converting your non-deductible mortgage into deductible debt through a re-advanceable HELOC — conversion timeline, deductible interest and estimated tax savings, with or without cash damming of rental expenses.

Principal residence value ($)Mortgage balance — principal residence ($)Mortgage rate (%)Remaining amortization (years)HELOC rate (%)Marginal tax rate (%)Annual rental expenses via HELOC ($) — 0 if nonePayment frequency

Estimate of the conversion mechanics: re-advanceable portion capped at 65% of value (federal combined-loan rules), HELOC interest paid in cash, constant rates, fees and prepayment limits ignored. In Quebec, deduction of investment-related expenses is limited to the year's investment income (carryover available); expenses incurred to earn rental income are not subject to that limit. Not tax advice — consult a tax professional before acting.

The tool simulates the conversion mechanics month by month: each mortgage payment frees principal, re-borrowed on the re-advanceable portion of the combined mortgage product for a productive use. Federal rules on combined loan plans cap the re-advanceable portion at 65% of the property value — while the mortgage balance sits above that bar, no room frees up. Optionally, cash damming: rental expenses are paid from the HELOC and the freed cash prepays the mortgage, accelerating the conversion.

The result is a factual estimate of the mechanics: first available room, full conversion, deductible interest and tax savings at your marginal rate. The detailed mechanics, a worked example and the Québec investment-expense trap are covered in the guide below. The optimal variant for your profile, the after-tax net-worth impact and rate sensitivity are in DeedWorth.

Read the full guide: Guide: the Smith Manoeuvre in Québec →

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Frequently asked questions

What is the Smith Manoeuvre?

A strategy that gradually converts a principal-residence mortgage (non-deductible interest) into investment debt (deductible interest): repaid principal is re-borrowed on a re-advanceable HELOC and put to an income-earning use.

Is it legal?

Yes. Interest is deductible when borrowed money is used to earn business or property income. Tracing matters: every re-borrowed dollar must go to the productive use, never mixed with personal spending.

Why does no room free up at first?

Because the re-advanceable portion of a combined mortgage product is capped at 65% of the property value. While your mortgage balance exceeds 65% of value, every repaid dollar reduces debt without freeing room — conversion only starts once you are under that bar.

What is cash damming?

A variant for rental-property owners: rental expenses are paid from the HELOC (productive use, deductible interest) and the freed cash prepays the principal-residence mortgage. Conversion accelerates with no net additional debt.

Does the Smith Manoeuvre work in Québec?

Yes, with an important nuance: in Québec, the deduction of investment-related expenses is limited to the year's investment income (carryover available). That limit targets the classic variant (borrowing to buy securities), not expenses incurred to earn rental income — which is why cash damming suits plex owners. The guide covers this nuance.

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