Outside the Box Thinking Mortgage Tips
Robinson Smith
Best Selling Author - Master Your Mortgage for Financial Freedom ? How to Use The Smith Manoeuvre to Make Your Canadian Mortgage Tax-Deductible.
When it comes to securing mortgages, traditional advice may not be the best for everyone. There are a variety of creative solutions and tips available to help anyone looking to purchase or refinance a home. We’ve asked some of Canada’s top mortgage professionals to share mortgage tips that the average Canadian might not consider.
This article will provide an overview of various “outside the box thinking” mortgage tips that can help you discover and secure the best financing options available and?pay off your mortgage?sooner.
Mortgage Tips for Canadians
Mortgage Tip?
Focus on what you can control, not what you can’t. For example, we can’t do anything about rising rates; what we?can?control are our financial structures and cash flows. i.e., The Smith ManoeuvreTM.
The Smith ManoeuvreTM?Tip?
The Smith ManoeuvreTM?is a strategy that every person in Canada should know and understand so they can transform their financial future. It finds efficiencies in existing financial cashflows that create long-term wealth for the individual.?
Nick Cox – Port Moody, BC
Mortgage Tip?
Ask questions. Be curious. Not only will it help you have a better understanding of your mortgage and finances, but it will open up a whole world of new opportunities. Ultimately, align yourself with professionals who share their knowledge and truly take the time to get to know you, your needs, and your goals.?
The Smith ManoeuvreTM?Tip?
The most common feedback I get when helping clients implement The Smith ManoeuvreTM, specifically when they’ve had their mortgage for ten years or so, is, “I wish I would have known about this ten years ago.” So, educate yourself today, don’t wait for tomorrow.?
Amber Easthope – Edmonton, Alta.
Mortgage Tip?
Always review the terms of the mortgage and take preference for mortgages that have flexible pre-payment privileges – and pay special attention to their cancellation penalties.?Ask the professional you are working with to explain them and provide specific examples/scenarios of how they work.?
The Smith ManoeuvreTM?Tip?
Always, always, always have a separate bank account to draw your investment properties’ mortgages and other expenses from.?Do not mix your personal mortgage and home expenses in the same account. Separating them will make your record-keeping cleaner for yourself and the CRA. Also, when you are applying for new mortgages and need to provide bank statements to lenders, you will not be showing them all of your banking habits.
Roberto Pelaccia – Oakville, ON?
Mortgage Tip?
Don’t panic. The first and most important advice I can give you is not to panic and make a sudden or rash decision without discussing and reviewing your options with your mortgage broker. Your mortgage change from a variable to a fixed rate can be made without cost. However, you should be aware of the length of the term offered if you change to a fixed rate. Also, be mindful that once you switch to a fixed rate, you can’t go back and that there could be penalties for the change.?
The Smith ManoeuvreTM?Tip?
Create a viable plan. What is your retirement plan? Do you plan to make further investments or purchase investment property over the next one, two, or five years and beyond??Would you like to pay less income tax and build your wealth simultaneously? Did you know that The Smith ManoeuvreTM?does not require you to earn more income to make these investments to build your wealth? A solid understanding, key information, and knowledge are critical to implementing The Smith Manoeuvre, as is being set up with the right mortgage product. These are the reasons why working with a Smith Manoeuvre Certified Professional (SMCPTM) is so critical to the process and your success.
Keith Uthe – Calgary, Alta.
Mortgage Tip?
If you have an insured mortgage, transfer your default insurance to the new lender when switching lenders at renewal. Doing so will help you get the lender’s most competitive mortgage rates.
The Smith ManoeuvreTM?Tip?
Consider going with a lender that lets you set up at least two separate HELOCs in a readvanceable mortgage (not all lenders let you do that). Doing this is helpful later if you need to borrow funds for personal use. You may not plan to but plans often change. For example, you may need to borrow money for home renovations or topping up your RRSP/TFSA. If you only have one HELOC that you’re using for The Smith ManoeuvreTM, you won’t be able to do that without risking the interest deduction you worked so hard to build up with The Smith Manoeuvre.
Sean Cooper – Toronto, ON
Mortgage Tip
In selecting a mortgage broker or banker to assist you with setting up a Smith ManoeuvreTM-compatible product, ask them what strategies they see working for you. Ask them how they (personally) and their clients have implemented The Smith Manoeuvre strategies.??
The Smith ManoeuvreTM?Tip
Implementing The Smith ManoeuvreTM?strategies at any point in your life makes sense; who couldn’t benefit from increasing tax deductions and lowering your taxable income to create possible tax refunds while continuing to build your investment portfolio?
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Kelly Prsa – Windsor, ON
Mortgage Tip?
Next time you look for a mortgage, consider something beyond the 5-year Fixed option your bank wants to sell every day (wonder why?). There is an entire universe of possibilities for you to choose from, and one of those might be a better fit for your situation.
The Smith ManoeuvreTM?Tip?
Yes, the higher interest rates mean you pay more on the Home Equity Line of Credit each month.?But that also means you will get a proportionately higher Tax Refund from the taxman at the end of the year to pay down your mortgage faster. So, this is the time to double down and not the moment to pause.
Neil Joseph – Scarborough, ON
Mortgage Tip?
There are certain mortgages that allow you to deposit your pay cheques directly into the mortgage account which will lower the mortgage balance.?By doing this you will immediately pay less interest on your mortgage on a monthly basis then if you just deposited your pay cheques into a chequing account.?This one change can have a significant impact on paying off your mortgage in record time.
The Smith ManoeuvreTM?Tip?
Implementing The Smith ManoeuvreTM?allows you to make your mortgage tax deductible by using your home equity line of credit to invest which creates larger tax deductions, which will assist in generating yearly tax refunds.?If you were to take the line of credit funds earmarked for investment and invest them in starting your own business, the business would, during the normal course of business, also have business deductions against your personal taxable income creating potentially larger tax refunds. More deductions…higher tax refunds.
David Rhodd – Toronto, Ont
Mortgage Tip
Look at the monthly payment in relation to your household budget, affordability is key.
Smith ManoeuvreTM?Tip
The accelerators are very powerful tools and you likely are able to use more of them than you may realize. Once you have set up your Smith ManoeuvreTM, revisit after a few months to see if you can uncover some more of the accelerators.?
James Knull – Vancouver, BC
Mortgage Tip
Put a plan in place. The most common mortgage term in Canada is a five-year fixed, but the average length of a mortgage is less than four years. Short-term fixed and variable-rate mortgages give more flexibility, while longer-term fixed-rate mortgages provide protection.
Smith ManoeuvreTM?Tip
Be open to a new mortgage management method. Most people are taught to pay off their mortgage as quickly as possible, which creates home equity, but home equity only benefits you if utilized.?The Smith ManoeuvreTM?rethinks this by making your mortgage work for you by paying off bad non-deductible debt quicker and converting to good tax-deductible debt while?growing your investment portfolio.
Matthew Parker – Vancouver, BC
Mortgage Tip
Is your mortgage up for renewal in the next 6 – 12 months? The best time to start the conversation about your renewal is six months before your renewal date. Fun Fact – borrowers can move lenders at renewal and there is often no fee for doing this! Rates and terms may be better just for changing lenders at renewal and Mortgage Brokers have access to unique products that may offer better rates and terms than your existing lender.
Smith ManoeuvreTM?Tip
Are you carrying non-deductible consumer debt such as car loans, unsecured lines of credit or credit card balances? These debts come with high interest rates and payments and the interest is not tax-deductible. When setting up a new mortgage to implement The Smith ManoeuvreTM, if there is space, borrowers should consider rolling this debt into the new mortgage. The debt is still “non-deductible” but at least you have lowered the interest carrying costs. This strategy will no doubt improve monthly cash flow and save hundreds or thousands in the first year in your salvaged payments. Over the coming months and years this debt will be converted to investments and in turn tax deductions using The Smith Manoeuvre conversion process. A borrower could further this win by applying the extra cash flow savings each month as a mortgage prepayment (cash flow diversion accelerator), thus more quickly converting the mortgage interest to a deductible expense.
Marci Deane – North Vancouver, BC
What is?The Smith ManoeuvreTM?
The Smith ManoeuvreTM?is a creative, legal, financial strategy designed for Canadian homeowners to convert the non-deductible debt of a house mortgage to the deductible debt of an investment loan. This strategy simultaneously ensures the speedy elimination of a non-deductible mortgage while building a free-and-clear, non-registered ‘personal pension portfolio’ and sees you enjoying substantial tax refunds annually for many years.
In his book, author Robinson Smith describes how the typical Canadian homeowner who implements The Smith ManoeuvreTM?could realize a benefit of approximately $400,000 or more over the life of their 25-year mortgage.
Since the strategy’s development, Canadians have been using The Smith ManoeuvreTM?to keep more of their money to reduce home ownership costs and improve their financial security.