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Ed Rempel’s Picks for The Best Smith Manoeuvre Mortgage I

Ed Rempel has put together an article for us indicating his favorite Smith Manoeuvre Mortgage(s).  This is part 1 of a 3 part series.  I will be staggering the articles, so make sure to stay tuned.  Also note that Ed Rempel's mortgage picks are in the perspective of an advisor, which may or may not be the best pick for the "Do it Yourselfer". Sometime in the near future I will do a follow up post soon on the best readvanceable mortgage for the "Do it Yourselfer".

"It was impossible to get a conversation going; everybody was talking too much." – Yogi Berra

The Smith Manoeuvre is a simple concept, but fairly technical to set up. It is easy to do, but also easy to mess up.

The first step is to get the right mortgage, which is why one of the most common questions we are asked is what mortgage is best.

The mortgage industry is really like the investment industry and the insurance industry – lots of people selling all kinds of product with all kinds of sales pitches – but very few unbiased people giving real advice.

We have a unique perspective in that we are not mortgage brokers or bank mortgage reps. But we’ve implemented the Smith Manoeuvre with hundreds of clients using many different variations – and we have actual experience with clients at almost every financial institution that offers a Smith Manoeuvreable (is that a word?) mortgage.

We have found from experience that mortgage reps are not always right about details of their SM mortgage. For example, we originally asked all the major banks whether their mortgage allowed investing directly from the credit line. We eventually found that what ALL of them had told us was wrong – with those that said it would work it didn’t, and with those that said it would not work it did!

We don’t sell mortgages. We are the ones figuring out the best SM strategy for each of our clients, setting it up, making sure we follow all the tax rules and making sure every step works. So, we know which mortgages really work.

We use a number of mortgage contacts, because nobody has access to even ½ of the best SM mortgages. Of the 7 SM mortgages available, 3 are available from mortgage brokers, one from financial planners, and 5 directly from a bank. Nobody provides more than 3 of the 7.

A mortgage professional can, of course, refer you to a bank for the best SM mortgage, but would not be paid anything for that. Mortgages are their business, so you can’t expect them to refer you to a bank that won’t pay them. We have not been paid by any financial institution, so we are not biased by compensation.

To do the SM, you need a readvanceable mortgage – a mortgage that is linked with a credit line so that the credit line increases as the mortgage is paid down.

There are 7 SM mortgages available in Canada that readvance every dollar paid down on the mortgage. We have been told about many others, but only these 7 checked out. There are 4 main ones we would recommend and 3 that we essentially would not use (if we have the option):

SM Mortgages we recommend (depending on the client situation):

  1. BMO Readiline or HOLC – From BMO only.
  2. Merix HELOC – From mortgage brokers.
  3. Royal Homeline – From Royal only.
  4. TD HELOC – From TD only.

SM mortgages we do not recommend:

  1. Firstline Matrix – From mortgage brokers.
  2. Manulife One – From financial advisors or Manulife.
  3. Scotia STEP – From Scotiabank or mortgage brokers.

I’ve discussed our concern with Firstline Matrix at length on MDJ. They do not offer variable or 1-year mortgages which studies have shown save money over longer term fixed mortgages. And more manual transactions would be required at Firstline. You can’t invest directly from the credit line and need to transfer manually to a chequing account. There are also usually legal fees to set it up, plus there is the strange point scheme they offer to mortgage brokers that we are not sure is good for our clients. We would not recommend Firstline Matrix for the SM since there are better options.

Manulife One can work for someone with little or no mortgage, that tends to have high bank account balances and that does not mind the $14/month fee. But we would not recommend it generally. Manulife ONE is a completely different animal. It is an Australian mortgage that is your chequing, savings, mortgage and credit line all in one. It is a concept so simple that it is hard to understand for us Canadians used to having many different accounts. When you take $100 cash, it says your chequing account balance is $-247,000!

By way of full disclosure, I have a Manulife One myself, but have not recommended it for any clients. With no mortgage, we use it as an investment credit line so we get high daily interest on our chequing accounts. As an advisor, I get a break on the 14/month fee.

Manulife does not negotiate their mortgage rates and tends to not be competitive with the other banks fully discounted rates. They also do not offer a variable below prime rate. You set it up quite differently from other SM mortgages. Your main mortgage is a credit line, but you can lock in a fixed rate for much of it or for the deductible part.

Scotiabank STEP is much more complicated as an SM mortgage because it does not advance automatically. You need to go to the branch to have them increase the credit line. Nobody wants to go into the branch every 2 weeks to request an increase to their credit line. You also cannot invest directly from the credit line, so you need to manually transfer to a separate chequing account.

Our clients there have essentially found it too complex to do the SM, so we just fake it as best we can until their STEP is due and we can move it to an automatic readvanceable mortgage.

This leaves 4 SM mortgages. One of these 4 is generally the best for every client. In Part 2 of this article, we will look at them.

The best SM mortgage, of course, is not the same for everyone but depends on your specific situation. We’ve found that the best SM mortgage, for any situation we can think of is one of:

  1. BMO Readiline or HOLC
  2. Merix HELOC
  3. Royal Homeline

In part 2, we'll look at the criteria when evaluating a mortgage for The Smith Manoeuvre.

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About the author: Ed Rempel is a Certified Financial Planner (CFP) and Certified Management Accountant (CMA) who built his practice by providing his clients solid, comprehensive financial plans and personal coaching.

Ed has written numerous articles to educate the public and his clients on his unique insights into strategies that actually work, instead of the “conventional wisdom” common in the financial industry.

Ed has trained more than 200 financial advisors and is considered the Smith Manoeuvre expert in the Toronto area. He has received accolades from Frasier Smith in his book “The Smith Manoeuvre” for customizing this strategy for hundreds of clients. His extensive experience in tax and finance has placed him in high demand. Ed’s team collaborates on each of their clients to help them create financial security and freedom.

{ 36 comments… add one }

  • Paolo January 20, 2008, 12:40 pm

    Ed: I apologize, I was wrong. I had a look online again and I misread my statement. The “total credit available” increases as my mortgage is being paid off, which was the amount I was looking at. However, the “available credit” has remained fixed at the original LOC amount, which is how much I can actually use. There is a footnote saying seeing the branch, call an 800 number or make an online request to increase the available credit. The online request would seem convinient enough, but I got an invalid request error when I tried in now (Sunday morning). I’ll have to try again another time.

  • Ed Rempel January 20, 2008, 8:00 pm

    Hi Paolo,

    So they have not changed. They’ve been saying they are changing it any time for about 5 years now. The 800 number is new and may be more efficient. The on-line request works for some of our clients and not others. They tell me it has something to do with whether or not there is a credit card included in your STEP plan, but we have not been able to confirm that.

    The on-line request does not happen right away. It sends a note to Scotia who then do a check on you and respond in a few days.

    Since you are stuck at Scotia for a while, we have a couple of clients that have a sympathetic bank manager at Scotia that increases their credit line limits for them manually every month. Most won’t do this, but you can ask your bank manager.

    Unfortunately, it is all quite inconvenient, which is why we avoid Scotia for the SM if possible. There are a bunch of good choices that automatically readvance with every payment.


  • alex January 24, 2008, 1:19 pm

    hi ed,
    here is a quote directly from mcap flexstar product sheet:

    “Redraw funds at any time — As the mortgage balance is paid down, those funds can be
    redrawn at any time — over the phone, via email or using the MCAP Access Card.
    • Security of knowing funds can be accessed immediately
    • For any purpose — unexpected emergencies, investments, high interest credit-card
    debt, renovations, a vacation, the options are endless …
    • No need to refinance or apply for another loan when extra funds are needed”

    is this not a true readvanceable mortgage??

    just to be clear- re: the ‘accounting ‘ issue with tracking the interest within flexstar- is it just more of a nightmare attempting to correlate your investment purchases drawn from the credit line? or are you saying the complication outright disqualifies you from doing the SM with the product- as per rev can or an accountant??

    thanks, alex.

  • SM January 24, 2008, 4:59 pm

    Hi Ed,

    Are you familiar with the court case currently scheduled to be heard this year at the Supreme Court (Lipson v. The Queen). The party in question did not use the SM, however used another tax “planning” strategy. Just curious as to the thoughts surrounding the outcome of this case as it might relate to the Smith Manouvre. They’re using the over-arching net in the tax code namely GAAR (General anti-avoidance rule) The way I understand it, the SM doesn’t “avoid” taxes or abuse the rules. Mortgage interest is clearly separate from the HELOC and is not tax deductible, only that portion of the interest on the LOC used for investments is used for the tax deduction. Any thoughts welcome…

  • Ed Rempel January 25, 2008, 12:05 am

    Hi Alex,

    No, this my understanding about Flexstar is that it is not a readvanceable mortgage. It is just an ordinary secured credit line.

    The difference is that with a readvanceable mortgage, you need to be able to immediately reborrow in a DIFFERENT ACCOUNT, not in the same account.

    If you have your mortgage as an ordinary credit line and then borrow part of it to invest, you will run into a lot of trouble claiming the deduction. This is because it is all comingled. When you make your regular mortgage payment, are you paying off the deductible or non-deductible amount?

    We would recommend always borrowing to invest from a separate account, not from your main mortgage account.



  • Ed Rempel January 25, 2008, 12:11 am

    Hi SM,

    Are you named after the Smith Manoeuvre? If so, what is your connection or interest in it?

    I read up on the Lipson case nearly a year ago. I don’t remember all the details, but they had a complicated series of transactions that were ruled a sham when taken all together.

    This does not apply to the SM. You are correct in your comments about it. The SM is ordinary borrowing to invest. Almost every company in Canada and thousands of individuals borrow to invest in their own or other businesses every day. This is not a sham series of transactions. It just follows the existing tax rules on borrowing to invest.


  • alex January 25, 2008, 12:02 pm

    i believe the flexstar is, in fact, classified as a re-advanceable mortgage? it is not a credit line because it is not a collateral charge- it just ACTS as a credit line with respect to their re-borrowing allowances, features. it is too bad they don’t offer a separate account, though.
    you can actually port the mortgage from one home to the next- which is not allowed in a collateral charge (as you’d have to break the mortgage then refinance- incurring legal fees, etc.)
    i guess if someone still owes on their mortgage (non-deductible) this wouldn’t be for them. maybe more for the free & clear investor who can allocate ALL the allowable limit towards investments??
    it seems based on your info that, for SM, there is a certain type of readvanceable mtg required to implement properly v.s what the banks CLAIM is readvanceable & should work?? maybe that’s where all the confusion is??
    you’re right- for something so simple, it can be quite complicated!

  • Mortgage Broker January 25, 2008, 4:36 pm

    Hi Alex!

    Flexstar does let you readvance (redraw) your paid down principle, so in that sense your right. It is a “readvanceable mortgage.”

    However, Ed is totally correct that FlexStar has a huge potential flaw for investors. MCAP’s monthly statements do not segregate the interest on readvances in a way that creates a straightforward paper trail. When you make your monthly payments, it can be onerous to track if you’re paying deductible or non-deductible interest.

    We’re hoping MCAP adds a sub-account for the readvances later this year. Apart from this issue, FlexStar is an extremely flexible product.


  • alex January 25, 2008, 8:29 pm

    hi robert,
    yes, i’ve spoken to a few lenders and they all seem to tell me ‘later this year’ & ‘we’re working on it’ or ‘hmmm, maybe we should consider this’. it seems to me that if you’re going to market product as a leveraging tool for investment- then u should really sit down for a few minutes on the development side, & get it right. i think flexstar needs to have a) the sub-account & possibly multiple sub-accounts b) ability to split into a fixed or variable rate & leave the heloc alone…the problem with ‘b’ is that they potentially allow us to offer a ‘below prime’ heloc on the entire amount- so if you split them, they probably wouldn’t allow you the rate discount (which is fine by me, provided everything else was in place).
    of course i think we all know it is the administration cost & time the banks want to avoid by doing this…however, if one has it, we know it’s doable.

    do u hear the same? any other lenders stepping up to provide the product we’d need to market SM properly?? national bank is also in ‘talks’ come april or so…none of these ‘sheep’ seems to want to lead, do they??

  • Mortgage Broker January 28, 2008, 12:50 am

    I hear you Alex. There really isn’t a segment killer yet in the readvanceable mortgage space. It’s partly due to lender’s back-end limitations (i.e. technical or financing hurdles), and partly because lenders haven’t sufficiently analyzed borrowers’ needs.

    Some lenders have come close (e.g. Firstline, BMO, Merix, CT, MCAP, etc.) but have fallen short with a few glaring omissions. Someone will get it right though…perhaps later this year.

    As for other readvanceables on the horizon, MyNext, People’s Trust, and National Bank are all developing new ones. Not much word yet on the features. National Bank’s revamped product is due in April as you note.


  • alex January 29, 2008, 3:27 pm

    apparently, the change with national bank (around april 21st) is that it will be an ‘automatic’ re-advance once their fixed or variable component is paid down- as opposed to the current ‘manual’ request.
    still, for 1 or more sub-accounts, a $2.50 monthly charge will apply ($30/yr for admin cost, labour?) ehhh, i guess that makes sense- would be nice if it was all free though :)

  • Mortgage Broker January 29, 2008, 5:17 pm

    I’m with you Alex. For some, $2.50/mo is a pittance in the big scheme of things. Nonetheless, account fees like this are so nickel and dimey!!!


  • alex January 31, 2008, 4:31 pm

    MCAP has, effective immediately, discontinued their flexstar mortgage product! apparently the ‘appetite was not there’, or so they say? i’m sure more info, as to why, will be leaking over the next while. they are going back to the drawing board to see if they can tweak the product for a possible re-launch down the road- no news on when, or even IF, it will resurface.

    so much for ‘mortgage of the year’- eh melanie? too bad…i thought their the annuity structure was fantastic!


  • Ed Rempel February 3, 2008, 5:03 pm

    Hi Alex & Rob,

    We’ve learned to not believe any of these promises until the product is out. Every financial institution that has a readvanceable has been promising improvements. Scotia has been promising a better product for more than 5 years.

    I guess the readvanceable is still not a mainstream product, since a reletively small number of people do the SM. Readvanceables are mainly sold as a product to finanace additional spending, in which any product is fine.

    Maybe that is why it is just not priority for them.

    So National says they will make it automatic? Will they also eliminate their high minimum advancement ($5-10,000)?

    We have one client at National with an All-In-One that has been itching to do the SM, which he obviously cannot do at National. His is finally due this year and we will move it so he can start the SM – unless they finally have a good product. Why would they have to charge a fee – is this not automatic involving no labour?


  • Mortgage Broker February 3, 2008, 5:14 pm

    Hi Alex, Re: Flexstar. Yes it’s pretty sad they shelved it so soon. But it was still a great product and justified the all the accolades it received. Hopefully it will be back sooner than later!

  • Mortgage Broker February 3, 2008, 5:41 pm

    Hi Ed!

    That’s true to a large extent. It’s always good to take lender promises with a grain of salt. Firstline, for example, has been planning a variable for a few years on their Matrix.

    I do think readvanceables are catching on though. A lot of our clients take them for reasons apart from the Smith Manoeuvre. Some, for example, will use them as a source of funds for down payments on future investment properties. Others like the peace of mind the built-in credit line affords–especially self-employed/commissioned individuals.

    Readvanceables are better than other options for these purposes because clients don’t have to reapply to get the credit. Plus the readvanceable LOCs are often offered at preferential rates to standalone credit lines and often not reported to credit bureaus.

    Re: NBC. We’re hearing they’ll drop the $5000 readvance minimum for clients who lock-in fixed portions. (Note: for people who just use NBC’s All-in-One at prime, there is no minimum–but the rate isn’t so great obviously). I’m also not sure why they charge that tiny fee. Like with Manulife, it seems somewhat ridiculous given the profit made from interest.

    Enjoy the Superbowl!

  • alex February 4, 2008, 11:31 am

    i would assume that national would waive their fees for readvancing this time around (we’ll see). because if they reduce the minimum from $5000 to say $100 or even $1- any avid investor would be hammered by service charges/fees making it not even worth the change in the 1st place! and yes, i don’t think developing their mortgages to cater to SM is a priority for the reasons you mentioned. most lenders push to use them for shopping, etc..though, if i were a bank, wouldn’t i be better served by encouraging clients to invest back with them? instead of spending the money on shoes? this way, they get the constant credit line interest AND the investments- wrapping their clients for life…isn’t that the bank’s mandate??? bank’s improve retention, constant interest revenue & constant growing investment asset base- client’s portfolio grows with no money out of pocket (and even better WITH extra money out of pocket!) its’ a win-win for everyone!…so what are we missing here??? it’s one meeting in a room with product developers, one pen, one piece of paper & a short time frame to implement??
    hmmm, sounds difficult.

  • MadMex March 6, 2008, 1:18 pm


    I have been reading many of these blogs on MDJ with great interest. I have plans to implement the Smith Manoeuvre at some point and I am researching the options available.

    The HELOC product offered by TD is recommended by Ed but I do not see many details or comments in the blogs or comments.

    Does anyone have any stories, caveats or suggestions that relate to the TD HELOC?

    Thank you in advance.

  • Gill July 24, 2008, 2:46 am

    I have a 5 year fixed mortgage, and researched the SM after I bought my house. We’re very tight on funds so I can’t afford to break my mortgage. I chose M1 second position to start my SM for several reasons.
    1. multiple accounts. One for investments, one non-deductible and for one for business cash flow. I plan to pay off the fixed mortgage $5000 at a time and use the cash flow and dividends to pay off the “chequing non-deductable.”

    2. M1 doesn’t require interest payback – I can let the investment loan to accumulate while I pay off the non-deductable.

    lesser reasons:
    3. Because manualife is an insurance company the loan doesn’t appear on my credit report (can anyone confirm?)

    4. RBC Homeline has strict rules – make it difficult to move away even after the term is up (can anyone confirm?)

  • Ed Rempel August 30, 2008, 12:54 am

    Hi Gill,

    I just noticed your post. Are you tight on cash flow or equity? You don’t have to pay the penalty from cash. It can be rolled into your mortgage.

    You don’t want to break your mortgage because you are short of funds? Will it save you money when you compare the interest rate savings to the penalty? Rates tend to be quite a bit higher at Manulife. We are getting 4.0% now on the fixed portion and it sounds like interest rates may decline even further this year. If it saves you money, then there should be a way to be able to find the money.

    It sounds like you are using the main Manulife One account as the investment portion. That may work as a second mortgage, buth would be difficult as a first. It does compound the interest automatically, but this can easily be done manually at any bank with one manual transaction each month.

    Many mortgages still don’t appear on the credit report. They announced last year that they were going to start putting them all on, but it does not seem to have happened yet.

    RBC is no more difficult to transfer out than any other bank. Scotia is the one that we have sometimes had more difficulty transferring out from.


  • pete November 4, 2008, 12:12 pm

    hello all i have been reading a lot about the sm on this wonderful site for about 6 mos and i am taking the plunge at the end of this month. looks like my timing may be ideal as the markets have pretty much hit rock bottom already. I was going to go with the tdmp out of toronto but they have increased all there costs for setting it up but the guys who were going to do it (mortgage broker and investor) will help us do it by ourselves. The mortgage man is suggesting national bank b/c they seem to have the best variable(5%) and 5yr fixed (5.69%) and heloc is at prime.I know this bank is not on this list so i was wondering if any body has experiences with them or any thoughts. I was planning on going variable but the 5yr fixed is close so i might change my mind as my bad debt would be converted in approx 6 yrs do u think i should lock in or will rates go down further any input would be great. another bonus i guess of national bank i was told that all the accounts i would need would be just with them making it easier.

  • wx_junkie March 18, 2009, 2:54 pm

    So… I heard rumor, and have since received confirmation from Scotiabank that they now have implemented this week, automatic HELOC increases on their STEP.

  • shane June 8, 2009, 1:27 pm

    Hi Ed,

    Good articles by the way, i’m enjoying them. I’m curious though as to how you “capitalize the interest” from the HELOC’s on the bank products? I know it can be automated with BMO’s product and with the National bank we just set up a second small line of credit (as per the smithmanoeuvre book) and make the interest payments back and forth each month from the HELOC and the 2nd small line of credit. (interest only of course). What other products (ie. TD/Scotia/Royal/Merix) can you do this with or better yet, which are the easiest to set up the capitalization of the interest in your opinion?


  • Ed Rempel July 19, 2009, 1:17 am

    Hi Shane,

    I just noticed your post. Automating the capitalization by having 2 credit lines pay each other’s interst payments does not really work with most institutions. Many don’t allow preauthorized payments to be paid directly from the credit line, and quite a few don’t have unsecured credit lines with interest only payments.

    You also need to have the 2 credit lines be at different banks to make it work.

    However, capitalizing is easy anyway. It is only one manual transaction each month (2 if you are at a less convenient institution). Just pay the interest payment and then withdraw the exact amount from the credit line to repay yourself.

    For example, if you are charged $100.01 interest, take that exact amount back from the SM credit line, either with an on-line transfer or by writing your self a cheque.

    This requires that you keep accurate records, but is easily done.

    To simplify your record-keeping, you could open a separate bank account just for SM transaction, but it is not really necessary.


  • Engineer August 26, 2009, 7:31 pm

    What do people think about National Bank All in One Right Now?
    I have read the posts that follow and some of them are older, it seems the product has changed somewhat.

    I am able to get the LOC portion at prime+0% because I am an engineer so that part is attractive (haven’t been able to get this low anywhere else).

    We are also able to put the entire mortgage under the LOC portion and only pay prime+0 on that too. Option to lock in at any time.

    What do people think of the product currently? We are looking at it in terms of the Smith Manouvre

  • Ken September 17, 2010, 3:38 am

    My choice for the Smith Manoeuvre is the RBC Homeline plan. I highly recommend the RBC homeline plan. Here is a brief summary why it’s my choice and why I chose the Homeline over the Merix Heloc. I didn’t consider Scotiabank as they report their mortgages to the Credit Bureau. I consider that on par with the bank faxing your balance sheet around town, which I completely disagree with. I didn’t go with Firstline as they seem gun shy about HELOC’s this past few years and my other choice was National Bank, which lost my business as they didn’t have the courtesy of responding to my application.
    I now have two Homeline Plans. One for my principal residence and one for my Rental property. My mortgage principal is instantly readvanced as soon as the mortgage payment is made. It can then be invested through RBC direct investing on the same day, transferred as an internet bill payment (no charge but takes 2 days), or you can set up a PAD from your RBC chequing account (you will have to manually transfer the funds from your LOC to chequing). You are required to set up an RBC chequing account with a Homeline but you don’t have to use it or bank with RBC as your mortgage payment can be debited from your own bank. RBC will waive the chequing account fee but expect a sales pitch as they try to earn your day to day banking business.
    As far as interest rates go, RBC posted rates are in line with the big banks, but when it’s time to negotiate, they will match or beat the discounted rates of any competitor. They currently blow Merix out of the water. My new Homeline LOC is P +.5 compared to Merix at P +1 and I have one mortgage segment at P -.7, compared to Merix’s variable rate of P -.5. Also, this mortgage is complely conventional with no CMHC involvement. My understanding is that Merix insures it’s mortgages and pays the premium, which keeps CMHC in the loop and in your business. I prefer a completely conventional mortgage with no CMHC or Genworth involvement. My original Homeline was negotiated prior to the financial meltdown in 2008 and RBC did not do what TD did to their clients and bump up the rate of my LOC. I have a friend with a TD Heloc and he is still fired up that TD increased his secured LOC from P to P +1. RBC did not do that to their Homeline clients! My 1st homeline was set up with a LOC at Prime and it has remained at prime since inception. I have two mortgage segments with my orignial homeline. One open and one closed. Both variable at P -.4
    RBC loves Homeline plan customers. They make lots of interest and you hopefully make more interest from your investments. It’s a win win relationship. The Homeline can have 5 mortgage segments, which makes it very manageable and should meet most people’s needs. The statements are clear and concise and all transactions are instantly updated online.
    One negative with the Homeline is that RBC reports your LOC balance to the Credit Bureau and a maxed out revolving credit line is the worst thing possible in the FICO credit scoring formula. It absolutely kills your beacon score. I had decided to lease a new compact car last year (a 12,000 Hyundai) for 200/month and with a net worth of 250K and perfect credit, I was declined because the maxed out Homeline LOC was like a huge gorilla sitting on my credit report. Other lenders you deal with don’t care if your LOC is a fully secured investment loan. To the lender, they see you as a person with a huge maxed out LOC and a big risk. My beacon went from 760+ down to 680 just by carrying a maxed out 40,000 LOC. The solution is easy. Once you accumulate a large LOC balance, convert it back into a mortgage segment. RBC resets your LOC back to nil and that is the LOC balance reported to the bureau. By doing that, my beacon jumped back up to 730 in one month and I was able to easily obtain my lease.

    I’m only a few years into my Smith Manoeuvre Journey and so far I’d say I’ve broken even but this is a 10 – 15 year plan and I’m confident that I will pay my mortgages off sooner than with two 25 year conventional mortgages. I also like that I’m taking an active role in my own finances.

    Best of luck to everyone out there!

  • Jamkomo January 31, 2011, 4:34 am

    My Institution has a mortgage similar to Scotiabank’s STEP. While you might not recommend it since one needs to increase the HELOC manually, the mortgage itself gives me a special interest rate that is really good (2.6% – this is posted Jan 2011), plus it’s open.

    So, I’m going to be doing it manually.

  • Jungle September 15, 2011, 1:30 pm

    This post is old and outdated.

    We have been doing the SM with the Scotia STEP for a while. Scotia made some changes in the last few years, now allowing “auto limit increase” to the HELOC as you pay down the principal.

    However please note, you must have title insurance only from a company called “First Canadian Title” on your property. I do not know why this is a requirement by Scotia, probably from teird selling. Also the minimum size of HELOC must be $5000.

    Also you can sent bill payments (no fees) from the HELOC to your brokerage. I believe any brokerage will accept bill payments as a way to fund your stocks. The HELOC can be set up as interest only payment too.

    Scotia also offers 1 year fixed rate mortgages, with option to early renew any time 6 months before term expiry.

  • Ed Rempel October 3, 2011, 1:35 am

    Hi Jungle,

    Yes, the Scotia STEP is not bad for the SM now that they have improved it. We find that these improvements are not the same everywhere (we think they have been releasing them branch by branch). You may or may not get all the options, depending on obscure options you take when signing up.

    For example, we have some clients that don’t have the $5,000 minimum and some that are not offered the automatic readvancing yet.

    Scotia still does not allow investing directly from the credit line automatically. We often use automatic monthly investments. Plus for clients with an investment loan, the interest payments can come directly from a credit line for tax purposes, but this does not work at Scotia.

    We find that their rates are usually relatively competitive, but not usually the lowest.


  • Ed Rempel July 12, 2012, 10:56 pm

    Hi Everyone,

    The best rate we are getting on a Smith Manoeuvre mortgage today is 2.69% on a 2-year fixed mortgage. This is the first time we have ever thought that a fixed mortgage more than one year was the best option.


  • Jared September 7, 2013, 11:38 pm


    What are the best SM mortgages available today? I currently have BMO Readiline and our renewal comes up in the near future. Wondering if I should be considering something else or if there is something that I should use to at least get a good rate out of BMO

  • FrugalTrader September 8, 2013, 1:16 pm

    I believe the options are still similar today. Check with TD, RBC and BNS.

  • Ed Rempel September 8, 2013, 3:31 pm

    Hi Jared,

    The mechanics of the various mortgages have mostly not changed, except that Merix is gone, Scotia is somewhat better but still not on our recommended list, and National now has a decent product.

    Among the best options, the deciding factor is the specific rates and what fees they absorb.

    Mortgage rates are a bit weird right now. They are rising in a competitive market. Some banks can only initially quote high, but have room to match after you apply. You don’t want to apply to many, though, because it can reduce your credit rating.

    The best rate is still 2-year fixed. Shop around for rates and absorbing fees. We have a free referral service from our web site, if you want help.


  • Jared September 10, 2013, 2:51 am

    Hello Ed,

    Our mortgage isn’t up for another 10 months or so, but we are considering whether breaking the mortgage might make sense to lock in a lower rate instead of waiting for that time to see where rates are next year.

    Extend and Blend seems like a possible option instead of out right breaking the current mortgage

  • Ed Rempel May 18, 2014, 1:12 pm

    Hi Jared,

    “Blend & extend” is almost never in your best interest. It almost always essentially means that the longer period or larger mortgage is at the posted rate. Nobody should pay the posted rate!

    You may calculate a savings in that your current rate is lower, but it is probably higher than it will be after the next time your mortgage renews.

    I would suggest to either pay the penalty and get a new mortgage at the lowest possible rate, or wait until your mortgage comes due.


  • Jim January 3, 2015, 7:42 pm

    What is up with the Mutual Fund Dealers investigation into your practices?

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