16 Oct

Variable Mortgage Product with a Fixed Payment


Posted by: Adam Sale

Flexibility of a Variable Mortgage Product with the certainty of a Fixed Payment

Today I spotlight a cool variable-mortgage product offered exclusively by TD. It’s their variable mortgage.

Variable mortgage products are excellent for those who have a higher risk tolerance, but want the flexibility of paying off their mortgage without incurring outrageous penalties.

Current market conditions (October 2020) make the variable mortgage slightly cheaper than fixed rate mortgages, but you also run the risk of your monthly payments increasing if interest rates increase in the future.

TD’s variable mortgage product acts differently than the others.

TD’s variable mortgage keeps the payment fixed for the desired term and instead manipulates the portion of principal vs interest. If interest rates increase, the interest portion of the monthly mortgage payment increases. If interest rates decrease, the principal portion of the payment will increase.

This can be an excellent product for those who wish to take advantage of the flexibility and low pre-payment penalties of a variable mortgage, but don’t want the risk of their mortgage payment increasing.

The down-side with this product is if interest rates increase the overall amortization period of the mortgage will increase. However, if interest rates decrease the amortization will also decrease.

To learn more about the differing mortgage products, and to discuss a mortgage scenario please give me a call or text @ 778-215-4121


Adam Sale

9 Oct

How to Make Your Mortgage Tax Deductible


Posted by: Adam Sale

How to Make Your Mortgage Tax Deductible

Did you know in Canada there are 2 ways to make the interest you pay on your mortgage is tax deductible.

The first way, is by owning a rental property. Interest accrued throughout the year on a rental property is a deductible expense from the rental income. This will lower your taxable income on your rental income.

The second way is through the Smith Manoeuvre.

The Smith Manoeuvre sounds confusing to most people, so I suggest researching this strategy to truly understand the concept.

In short, the Smith Manoeuvre uses your Home Equity Line of Credit to fund your investment portfolio.

This strategy requires a higher risk tolerance.

Steps to perform a Smith Manoeuvre:

  1. Obtain a mortgage with a Home Equity Line of Credit (Heloc) – lending rules a​llow 65% of the home’s equity to be in a Home Equity Line of Credit. The remaining amount of the mortgage must be allocated to a fixed payment account.
  2. Each monthly payment is part principal & part interest – the principal amount is re-advanceable.
  3. Re-borrow the principal amount after each monthly payment and invest in dividend stocks or Exchange Traded Funds. The interest paid on the re-borrowed funds is tax deductible.
  4. Use the tax refund at the end of the year to pay down the mortgage and continue the cycle.

To make the Smith Manoeuvre profitable, look for investments which pay a dividend yield that’s higher than the interest paid on the Heloc portion of the loan. The current interest rates on a Home Equity Line of Credit range from Prime +0.5%-1% (2.95%-3.45%).

Please note this is a higher risk investment strategy which is not recommended for everyone. Please do your due diligence and research the Smith Manoeuvre to see if this is the correct strategy for you!

For more information on mortgage products & Mortgage Strategies please call/text 778-215-4121 or email me at adamsale@dominionlending.ca

Have a great Thanksgiving weekend!


Adam Sale