Master Your Mortgage for Financial Freedom

Selected Excerpts from

Courtesy of your

Smith Mavoeuvre Certified Professional:

By Robinson Smith

Master Your Mortgage for

Financial Freedom

c: 403.614.8843

[email protected]

www.demystifyingmortgages.ca

'Everyone Shall Live A Life of Abundance'

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transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording or

otherwise) without the prior written permission of the publisher. This publication is distributed subject

to the condition that it shall not, by way of trade or otherwise, be lent, sold, hired out, or otherwise

circulated without the publisher’s prior consent.

DISCLAIMER:

The information contained herein has been developed over several years of experience and is

believed to be accurate and reliable. The reader is reminded that there may be variations in the

interpretation of various laws and regulations in different jurisdictions because of the nature of the

subject matter being dealt with.

The author and publisher specifically disclaim any liability arising from loss, personal or

otherwise, incurred directly or indirectly as a consequence of the use and application of any of

the information contained herein. In no event will the author, publisher, or any distributor of this

publication be liable to the reader.

This publication is distributed with the understanding that neither the author nor the publisher

is engaged in rendering legal, financial planning, investment, accounting, insurance, tax, or other

professional assistance or advice. If legal, investment, financial planning, accounting, insurance, tax,

or other professional assistance or advice is required, you should seek the services of a competent

professional with the required qualifications.

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Dear Reader,

This book can mean the difference between several vacations a year as opposed to only one.

It can mean the difference between both your kids going to university versus neither of them.

It can mean the difference between hardly ever arguing with the love of your life about money or seemingly

always.

It can mean the difference between getting in your Winnebago and travelling to Mexico every winter or

having to spend every winter in the cold.

It can mean the difference between playing golf three days a week when you’re in your 70’s or working as a

greeter at a big box store.

The financial benefit to a typical Canadian homeowner who implements

The Smith Manoeuvre

is in the

area of around $400,000 over the life of their 25-year mortgage. That is what this book is potentially worth to you.

In fact, that is just the typical base-case scenario - there is a very real chance that your benefit could be

much greater. In many cases we see projected improvements in net worth of over a million dollars.

Today you are going to learn how to re-engineer the way you deal with your house mortgage. When

you implement the strategy you are about to discover, you will begin now to build an investment portfolio of your

own choosing. You will decide whether you want to invest in stocks, bonds, mutual funds, investment real estate,

your own business or somebody else’s business. These investments will be free-and-clear. It will also cause the

taxman to send you annual tax refund cheques, big and growing ones, until you die at a ripe, wrinkly age. The tax

refund cheques come every year, they get larger every year, there is no tax on them and it is all perfectly legal.

But that’s not all. These tax refunds will enable you to eliminate your big, ugly, expensive mortgage in record time -

years ahead of where you would be without this strategy.

INTRODUCTION

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…But for now, let us look at a $400,000 mortgage with an interest rate of 3.5%, an amortization of 25 years and a 40%

marginal tax rate for you, the homeowner. What is the cost to you?

Well, first thing that comes to mind is that you need to pay back the original $400,000. That’s obvious. And equally

obvious is that you need to pay the bank their interest. You are borrowing from them and it comes at a cost that you accept.

At an interest rate of 4.0% over 25 years the total amount of interest you will pay to the bank for the privilege of borrowing that

$400,000 is $231,224. So now we’re up to $631,224. Ouch. Do you want to stop there? I certainly wish we could, but the fact is

that before you have the money in the bank to make that mortgage payment, you first need to pay tax on your income. And

over the course of this 25-year mortgage, based on your 40% marginal tax rate, you are going to pay $420,816 in taxes before

you can even make those principal-plus-interest payments. So what’s the grand total? How much do you have to earn at your

nine-to-five in order to pay off that mortgage? $1,052,040. Over one million dollars to pay off that $400,000 loan. That’s a lot of

hours at the office.

This very thing that got you into a home where you can live and raise a family in peace and serenity, is the very thing

that now threatens your peace and serenity. Because of this mortgage you aren’t able to put near enough away for your

future retirement - if anything at all. When the size of your mortgage payments is tacked on to the taxes you must pay and the

bills of life you must cover each month, how is one supposed to even dare think about retirement?

But don’t fret. There is a fix.

What Is

The Smith Manoeuvre?

CHAPTER 1

WHAT THE WEALTHY KNOW ABOUT YOUR

MORTGAGE THAT YOU MAY NOT

The Smith Manoeuvre

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 simultaneously ensures the

elimination of your non-deductible mortgage in record time while building a free-and-clear non-registered ‘personal

pension portfolio’ and enjoying substantial tax refunds each year for years to come. Your mortgage will melt away as fast

as your investment portfolio grows. The wealthy class has used this strategy successfully for years with the blessing of the

taxman, and this book extends the knowledge and provides instructions to the rest of us. It can make a huge positive impact

on your family’s net worth and financial security.

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The wealthy aren’t terribly different than the rest of us, but they are not exactly the same as us. How is that? Well, they

learned few things early on in life and they took action. It really is that simple.

From a young age they looked out at the world around them and saw everybody else structuring their financial

affairs exactly the same way. Like a bunch of stampeding lemmings, everybody was scrambling in the same direction on the

same path toward the same cliff, thinking that they were doing it the right way, because, well, if everybody else is it doing it...

But the soon-to-be-wealthy decided, “No thank you”, and went a different way. The path less traveled, if you will.

They thought to themselves, “If everybody else is working for a paycheque, struggling to make mortgage payments, car

payments, to put gas in the car, braces on the kids and groceries in the fridge and can barely able to afford two weeks

of vacation each year, not to mention retirement, why would I approach my financial life the same way as them? What

madness that is!”

Wealthy people are just as likely as you are to have a ‘mortgage’ on their home. The difference is that the monthly

interest portion of their ‘mortgage’ is tax-deductible, and yours is not. The wealthy got comfortable with debt – the good kind

– and you should too.

If I invest zero dollars each and every month, religiously, at 8% growth for 25 years, how much will I have at the end of

25 years? Now I know that not everyone reading this is a mathematician who has the powerful and specialized computing

programs at their disposal with which to do this calculation, so I’ll just tell you. Nothing. Surprised? I knew you wouldn’t be.

Now consider this: if I put $1,000 under my mattress each and every month at 0% growth, religiously, for 25 years, how

much will I have? I’ll have $300,000. That’s better, eh?

Now what if I put $1,000 cash each and every month, religiously, into an investment that does 8% per year for 25

years? At the end of it all I would have $951,026. Now we’re talking. We’re starting to get into some serious retirement comfort.

The Magic of Compound Growth

The debt of the wealthy generates deductible interest to reduce their tax, which increases their cash flow. They

get richer. Your debt, your mortgage, is paid for with your after-tax dollars, and generates no deductible interest. The task

at hand is to learn how to do what the wealthy do – convert the mortgage loan from bad debt where the interest is non-

deductible, to good debt where the interest is tax-deductible. By doing so you will be able to enjoy the wonder of compound

growth and watch your net worth increase exponentially.

The Objective of

The Smith Manoeuvre

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There is a rumour that the tax department is planning a new tax return for Canadians. The Canada Revenue Agency

(CRA) has been listening to citizens who think its format should be much simpler. Now please keep this under your hat as we

had to go through some shady backchannels to get a classified copy of the first draft of the upcoming simplified return, but

here it is:

Dear Taxpayer,

a. How much did you make last year?

b. Send it in.

Thank you,

Wikipedia maintains a list of personal income tax rankings for as many of the world’s countries as possible. At the time

of writing, only one country had higher personal income tax rates than Canada. And the Wikipedia list is 260 countries strong.

According to this list, we Canadians are the second-highest taxpaying citizenry on the planet.

CHAPTER 2

IT’S TOUGH OUT THERE.

ARE WE ON THE RIGHT TRACK?

Canadians pay more in taxes – federal, provincial, municipal and indirect – than we do in food, clothing and shelter

combined. Before we can pay for the basic necessities of life required to simply continue living, we must first pay the

government a sum more than the total expense of these three life-sustaining absolute necessities.

If as a citizen, I can’t successfully reduce the number of taxes I pay or the rates on these taxes, what is one to do? But if

you think there isn’t anything you can do about it, think again.

The taxes may keep biting harder and harder but you have the ability to lessen the hurt, because while you may not

be able to do much about tax rates, there most definitely is something you can do about how much tax you pay given those

tax rates. Let’s make the government send back some of the tax that we have already paid them throughout the course of

the year when they have taken it straight off our paycheque every two weeks.

How Much Tax Do We Canadians Actually Pay?

Well, What Can I Do About It?

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…What we have is blind hope and a vague idea. The blind hope is that there is some sort of pension plan we are able

to get on at some point. Maybe we don’t have one now but there’s always tomorrow, a new job with a plan, whatever the case

may be. The vague idea is that we have a house that we can always fall back on in 10, 25, 40 years or so. How exactly will we

fall back on it? ‘Don’t know yet,’ we say, ‘that’s a ways down the road…’

We Canadians generally have two pretty pressing financial goals. Firstly, we have this big, ugly mortgage that takes

a huge cut off our paycheque every two weeks. And it’s relentless. We naturally want this big debt gone as fast as possible.

The second pressing financial issue we have is that we know we need to save for our retirement. We don’t want to

work forever. We want to be able to actually stop working at some point (or at least drastically slow down) and enjoy our

golden years. Travel a bit more or play with the grandkids.

The Problem with Pensions

The Sequential Approach

…In fact, a 2019 study by the Canadian Centre for Policy Initiatives found that of the 90 TSX Composite Index-listed

companies that had defined benefit pension plans for their employees, only a few had fully funded their workers’ pension

plans in 2017. Collectively, these 90 companies were underfunded by a total of $12 billion, whereas the dividends paid out to

shareholders totaled $66 billion. They could have fully funded their plans five times over. But they chose not to.

…Lastly, the next time you are in Costco, Walmart or a fast food restaurant, take a good look around. If you haven’t

already, you will notice many seniors acting as ‘greeters’ or asking if “you want fries with that?” Do these seniors want to

be working there? I would suggest for most of them, no. I would suggest they would rather be playing golf, Texas hold ’em,

tending their garden, casting for trout…anything else. But they have no choice but to work in their ‘golden years’.

…But here’s the fun part about the whole debate around which goal is better to attack first, and it’s like watching two

guys in the boxing ring. While blue corner is pounding on red corner that concentrating on paying down the mortgage is the

best move and red corner is trying to beat blue corner into agreeing that saving for retirement is the way to go, it is to a large

degree moot in the first place.

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The most recent statistics are out and the uptake for reverse mortgages in Canada is increasing around 30% per

year. This is a direct testament to the inability of more and more Canadians to adequately prepare for their retirement. If they

were adequately prepared would they be selling their house back to the bank? No, they would not.

Make your mortgage and home equity work for you now so that it can create wealth for you. Don’t wait for 15, 20, 25

years while that home equity moulders at 0% growth to use it to take out a loan in retirement whereby the bank starts to own

more and more of your home each and every month. Remember this when someone tells you that they think it’s best that

you be mortgage-free and have lots of equity in your house that can help you in retirement.

Help you? Or the bank?

…So, if I just paid down my mortgage by $1,000 and created $1,000 of additional equity in that house, what is it doing

for me? How is that $1,000 increasing my net worth not just this month, but next month and the month after and for the

many, many months going forward that I am going to be living in my house? Nothing. That $1,000 of home equity is not in

any sort of investment vehicle. Heck, it’s not even in a bank account earning one percent. And if that $1,000 from my very

first mortgage payment is earning 0% the first month, it is also earning 0% the second month and the next month and every

month thereafter. For as long as I own my house, whether I am still making mortgage payments or not, that $1,000 will earn

me precisely 0%. I am not even getting a bank account savings rate, and I am certainly not even keeping up to inflation.

And not only that, the original $1,000 that reduced the mortgage balance earns 0% for as long as I own the house, but

the second $1,000 or so that reduces the mortgage balance also earns 0% for as long as I own the house and the third $1,000

and so on. Pretty soon I have tens of thousands, then hundreds of thousands of dollars that are mine but have never earned

me a single penny.

But I have the ability to generate investment-grade returns on the dollars by which my mortgage payment reduces

the balance, each and every month without requiring any more cash from my income.

The Reverse Mortgage

Your Mortgage Is Offering to Help - Don’t Ignore It!

…I tell you it is quite interesting to be observing this debate whenever it opens up in the personal finance world and we

have one side showing math that proves one argument and the other side with their own math. We can tackle these issues in

tandem, we aren’t restricted to tackling these problems in sequential fashion. So take the gloves off and hit the showers and

everyone go get a Red Truck IPA and turn the game on.

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…But what if I were able to pull the equity from the house as fast as I was creating it with my mortgage payments and

get it invested? If those investments were valued at $850,000 after the 25 years I’ve owned my house and I still owed the bank

$400,000, then if I sold my investments to pay back the investment loan secured by my house, I would have, pre-tax, $450,000

in cash and a clear title house worth $800,000. So, after 25 years, instead of having a net worth of $800,000 to enjoy, I would

have $1,250,000 to enjoy. And that is much more enjoyier, I think you’ll agree.

Okay, time to get down to the nitty gritty on process and functionality. How does

The Smith Manoeuvre

actually

work? What is the process? In a nutshell, whatever equity you generate in your house via the reduction of the mortgage

balance due to the regular mortgage payment, you are going to reborrow to invest each month into a non-registered

investment account.

This reborrowing to invest leads to tax deductions because you are borrowing with the reasonable expectation of

earning income. These tax deductions are calculated at tax time and the result is that over the course of the past twelve

months you have paid too much tax - when the government was taking their share off your paycheque every two weeks they

were doing so based on your estimated income exclusive of any tax deductions. So, because you have these valuable tax

deductions the Canada Revenue Agency (CRA) has to send you money back at tax time. There’s your refund.

And when the resulting tax refunds arrive each year you are going to prepay the mortgage by that amount and then

reborrow it as well in order to invest. That’s it. But first you need to restructure so that you will be able to access that monthly

increase in equity. You need a readvanceable mortgage.

Turn Your Mortgage Into Money

CHAPTER 3

THE SMITH MANOEUVRE

EXPLAINED

…A readvanceable mortgage is basically an agreement by the bank to always allow you to have owing to the bank

the amount of the original total loan, should you wish. If I borrow $400,000 day one to buy my house, the bank is okay with me

always owing them $400,000.

…So what have I accomplished with the above? Well, if I was not implementing

The Smith Manoeuvre

and actually did

use the newly available credit each month to make a Lexus payment, go on some vacations and fancy dinners throughout

Be Careful How You Use the Readvanceable Mortgage

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the years, then I have managed to replace $400,000 of non-deductible debt on the loan portion with $400,000 of non-

deductible debt on the line of credit portion. And as the payments on the line are interest-only, there’s a good chance that I’ll

have this expensive, non-deductible debt for life.

And what will I have to show for it aside from the draining monthly payments? A car that has depreciated in value,

a couple of vacations that I enjoyed but now only have photographs of, expensive dinners out that got eaten…. You know the

old saying, “Leasing the lifestyle…” The point is that if I was reborrowing to consume this whole time, I have done nothing to

improve my family’s wealth - in fact I have harmed it - and I have next to nothing to show for it.

However, if I implemented

The Smith Manoeuvre

, I would have giant tax deductions leading to giant tax refunds for

life because I borrowed to invest, I would have eliminated the expensive non-deductible mortgage in record time considering

these annual tax refunds were used to prepay the mortgage, and I would have a large pool of investments which I can enjoy

at any time, typically in retirement.

CHAPTER 4

LET’S LOOK AT A COUPLE OF RESULTS

…Darren originally had a $400,000 mortgage at 4% and managed to pay it off right on schedule the day he retired at

age 65. Like most Canadians, Darren didn’t have a pension plan tied to his job and adding to this lack of pension plan, his CPP

and OAS were not nearly enough to allow him to retire in comfort. Darren had to resort to a reverse mortgage in order to have

enough retirement income.

…The assets being purchased each month will grow on a compounding basis of 8% per year in this example. The total

of the investment portfolio (Personal Pension Plan) at Mark’s age 65 will have reached $840,394.

Darren Does Not Implement

The Smith Manoeuvre

Mark Does Implement

The Smith Manoeuvre

…Mark reckoned that if he could handle his $400,000 mortgage at age 40, it would become ever easier to handle as

the years progressed considering increasing income as he moved through his career and the effect of inflation. By being

willing to hold his debt flat at the level from where it started, Mark was able to benefit more and more each year from the

compounding growth of his portfolio. As well, the increasing tax refund cheque he was getting each year allowed him to

make extra payments against his mortgage to eliminate that bad debt very quickly, and this new equity was also instantly

reborrowed to increase the portfolio yet again. As you can see from the chart above [not shown here], Mark had eliminated

the non-deductible mortgage loan in 22 years versus the original 25 years - the length of time Darren was making non-

deductible mortgage payments.

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Let’s now have a gander at the differences in the circumstances of Darren and Mark. What are the cold, hard facts?

Well, Darren retired at age 65 mortgage-free, just as he had always planned. But because he had managed to save precisely

zero dollars throughout the course of paying out his mortgage, he had to sign up for a reverse mortgage and start selling the

house back to the bank. He was actually concerned that he may live too long and that by doing so the bank would take all of

the house when he died and there would be nothing left for the kids.

Mark on the other hand, also retired at age 65 - three years after he paid out the non-deductible mortgage loan - but

he had a taxable nest egg valued at $840,394 on which he could rely for retirement income. While he did have an investment

loan of $400,000 as well, if we look at the net position, he had the value of his house and the net value of his investment

portfolio of $440,394 to enjoy ($840,394 taxable portfolio less $400,000 deductible investment loan). Figure 4.5 [not shown

here] assumes straight-line appreciation of the respective homes from $500,000 at age 40 to $800,000 at age 80.

So Mark had a net worth of $1,127,894 at age 65 and it just kept on growing. Darren, meanwhile, saw his net worth at

age 65 at only $397,500. And it declined from there.

You can download

The Smithman Calculator

at www.smithman.net and plug in your own assumptions as regards

current or proposed mortgage balance, amortization, interest rates, your marginal tax rate and projected investment growth

rates to see how your current non-Smith Manoeuvre plan compares to the result if you implemented

The Smith Manoeuvre

now.

What is the Comparison?

What Do Your Numbers Look Like?

What we’ve just seen above is what we call the Plain Jane Smith Manoeuvre. Basically, this is simply taking the

mortgage payment that you are already making anyways - nothing else - and putting it to work in order to create valuable

tax deductions which lead to tax refunds allowing you to prepay the mortgage once a year at minimum and therefore

being rid of that expensive, non-deductible mortgage debt much quicker than otherwise. And in order to generate those

deductions you must invest, therefore improving your net worth on a monthly basis and building up retirement savings to

allow you to avoid being forced to downsize or having to sell the house back to the bank in retirement.

All of this starts happening now. Not in 25 years, not next year, but now.

That being said there are ways to speed the process up considerably - generate bigger tax deductions and refunds

faster, eliminate the non-deductible mortgage debt faster, and build your nest egg faster. And again, all without new or

CHAPTER 5

ACCELERATORS

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additional money from you. Without anything more than what you already have or are already laying out each month. You

just need to restructure your financial affairs and make your money work more than once. Really make it sweat.

We call them accelerators, and there are a number of them. Namely the Debt Swap, the Cash Flow Diversion, the

Cash Flow Dam, the DRiP and Prime the Pump.

Borrow back and invest the monthly principal reduction that occurs as you make your monthly mortgage payments

over the months remaining on your mortgage. Borrowing the money back to invest creates an investment loan and the

interest on this investment loan is tax-deductible.

Each year, when your tax refund arrives, use this money to make an extra payment against your mortgage, then

immediately reborrow and invest the same amount.

Reduce your non-deductible mortgage balance using cash obtained by liquidating any…non-registered paid-

up assets you own, and then borrow back the same amount to invest in replacement assets. …The Debt Swap is the act of

swapping non-deductible debt for deductible debt using money regardless of the money’s source.

Divert current monthly savings and investment plan amounts against the mortgage loan, and then borrow back the

same amount to invest.

Use proprietorship revenues to prepay the mortgage loan, then reborrow to service the proprietorship expenses. If

the revenues are greater than the expenses, invest the difference.

Step I of the

Plain Jane Smith Manoeuvre:

Step II of the

Plain Jane Smith Manoeuvre:

Step III - The Debt Swap Accelerator:

Step IV - The Cash Flow Diversion Accelerator:

Step V - The Cash Flow Dam Accelerator:

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Request dividends to be sent to you in cash rather than reinvested automatically. Use these dividends to prepay the

mortgage loan, then reborrow to purchase the same stock or investment that issued the dividends or invest elsewhere.

If you have available funds that can be accessed immediately upon refinance into a readvanceable mortgage

(or after restructuring your existing readvanceable mortgage), after a thorough discussion with your accredited Smith

Manoeuvre Certified Professional advisor, you can directly invest some or all of the available funds. As this is discretionary

borrowing, homeowners are advised to cover the incremental interest from personal cash flow and prepay the mortgage,

then reborrow to service the related incremental deductible interest.

Step VI - The DRiP Accelerator:

Step VII - The Prime the Pump Accelerator:

CHAPTER 6

LET’S TALK ABOUT DEBT AND WEALTH

ACCUMULATION

The Smith Manoeuvre

makes no recommendation on debt levels for the citizen. The strategy begins with the

assumption that you and the bank are satisfied that you can handle the amount of leverage you have assumed in the

mortgage loan you have already agreed to service before you read this book. You have already taken on the debt in the form

of a mortgage which means you have already leveraged your borrowing power.

Whether you have too much or too little debt is between you and your Smith Manoeuvre Certified financial

professionals. We know with certainty that because it’s your house mortgage, the interest expense is not tax-deductible.

The Smith Manoeuvre

will fix that problem. Without increasing your debt you have learned how to convert your bad loan to

a good loan. Simultaneously you will start building a free-and-clear investment portfolio for your retirement – your Personal

Pension Plan. And to make it completely worthwhile, the tax department will begin sending your tax refund cheques that are

also tax-free with which you are able to eliminate that bad debt faster than otherwise possible. All of this, using no new money

from your bank account.

Levels of Debt

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The Canada Revenue Agency (CRA) is very strict about claims for deductibility of interest. This item bears repeating.

The basic test for deductibility revolves around the answer to the question ‘to what purpose did you put the money that you

borrowed?’ If you borrowed to buy the family car, to take a vacation, to buy a cottage or your principal residence, then you

may not claim the interest on the loan as a tax deduction. On the other hand, if you borrowed the money to invest with a

reasonable expectation of earning income from your investment, you may deduct the interest.

Myth - The Debt Swap IS

The Smith Manoeuvre

Myth - The Growth Rate Must at Least Equal the Interest Rate

Myth Around Nominal Rate of Interest vs Real Rate of Interest

Myth - The Investment Portfolio Needs to Earn More Than the Line of Credit Rate in Order to Service

the LOC

Myth - Leverage…or Is It?

When Can You Deduct Interest?

Common Myths

CHAPTER 7

COMMON MYTHS, MISTAKES AND OTHER

THINGS TO KNOW

There is a lot of misinformation out there folks, so beware. Just recently I came across a piece on the internet written

by a financial journalist for publication by one of our very well-known broadcasters. This journalist explained

The Smith

Manoeuvre

was accomplished by ‘selling all non-registered portfolio holdings and using them as a down payment on the

mortgage after which you could reborrow to invest’.

Firstly, what this appears to describe is the Debt Swap, which you hopefully will recognize by now. The Debt Swap is

simply an accelerator, it is not

The Smith Manoeuvre

itself. Secondly, by implementing the Debt Swap, you are not using the

funds as a ‘down payment’. If that were the case, you would not be able to reborrow and invest as it states above considering

the mortgage lender requires the ‘down payment’ to remain as equity in the house. What the author should have done is

simply replaced ‘down payment’ with ‘prepayment’ and noted that what was being described was simply an accelerator for

The Smith Manoeuvre

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HELOC vs Readvanceable - Same Thing, Right? Wrong.

All This Available Credit!

Put the Money to Work, Don’t Let It Just Sit There

Ahh, Christmas Debt and Unexpected Expenses

Open Account, Not Registered

What if You Move?

What Does This Cost Me to Implement?

The 65% Loan-To-Value Rule

A Quick Word on Rental Properties

Deductible Uses of Borrowed Funds

Market Risk

Interest Rates

Rules Can Change

Try to Keep Emotion out of It

Complacency

You May Be Ready for

The Smith Manoeuvre

, You May Not

The Smith Manoeuvre

Decelerator –

‘

The Smith Manoeuvre Lite

’

Insurance

Other Benefits of Tax Deductions

The Smith Manoeuvre

Homeowner Course

The Smith Manoeuvre

Certified Professional Accreditation Program

When my dad, Fraser, was first attempting to interest a bank to support his newly-developed strategy, he was turned

down by the Royal, the Montreal and the Bank of BC in that order. “Irregular” was the common reason given for refusing to

participate to bring tax relief to Canadian mortgage holders.

Common Mistakes

Other Things to Know

CHAPTER 8

WHAT’S IN IT FOR THE BANK? OR FOR CANADA?

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Not one to give up, he decided he needed to talk to a bank president. Guessing that he would not be getting an

audience anytime soon with the president of CIBC, Fraser elected instead to talk to the head of VanCity Savings. The Chief

Executive Officer was Larry Bell, recently arrived from his tenure as Deputy Minister of Finance for British Columbia. Fraser

didn’t know Larry Bell from a stick, but when he placed his call, the operator put him through without asking his name, and

CEO Bell answered the phone himself. Dad liked him right away. He told Larry he had an idea that would bring VanCity new

customers at the expense of the big banks and he was invited in immediately for a chat. Larry listened intently to Fraser’s

story, watched him draw his little pictorial, and when he was finished, Larry pushed his chair back and asked, “Why isn’t every

Canadian doing this?”

New Customers

Collateral Business

Good Customers

Self-Maintaining Asset Base

What Was It That Interested Larry Bell?

Deductible Interest – the Lubricant of Business Investment

Personal Investing and Tax-Deductible Interest

Lots of Benefits for Canada

Many years ago, Joe Clark was elected prime minister partly on the strength of his promise to give Canadians tax-

deductible mortgages. To his credit, the law was changed and the tax return forms the following year did provide some

partial deductions. The Liberals cancelled the program when Joe was defeated at the next election. The flaw in the program

was that it was a giveaway. There was no requirement for the homeowner to do any investing/conversion of the mortgage to

earn the deductions.

You will receive no tax refunds from the taxman using

The Smith Manoeuvre

unless and until you begin to convert

your debt from bad to good by investing for the well-being of yourself, your family, and all Canadians. Investing is good for

the people, and therefore it’s good for Canada. In the final analysis, this is why the Canada Revenue Agency will be happy to

continue to support

The Smith Manoeuvre

, and this is why you will continue to receive tax refunds.

The Tax Department, the Government and the Country

An Imperfect Attempt…

… Greatly Improved

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You have learned about

The Smith Manoeuvre

, which is a combination of several different strategies available to you

that, once implemented, will improve the financial well-being of your family in dramatic fashion, with very little cost, if any, and

no new cash flow required from you on an on-going basis.

The Smith Manoeuvre

does not require that you increase your debt. Instead you will simply arrange to keep the

amount of your existing debt constant for at least the interval of time it takes to convert the debt you have now from the bad

kind to the good kind. Because debt is not increasing, this is not classified as a leveraging program. It is a debt conversion

Individual Results Will Vary…

…But You’ll Love Yours

CHAPTER 9

SUMMARY – AND WHAT TO DO NEXT

The length of time it will take to convert your existing bad debt to good debt is influenced by several factors. These

include your mortgage balance and current rates, family cash flow, the amount of deductible interest you can claim to get

tax refunds, and the value of assets you currently own. These current assets might better be liquidated to provide more cash

to reduce your non-deductible mortgage loan.

In addition, the efficiency of

The Smith Manoeuvre

can be dramatically improved by diverting existing monthly

savings and investment plans against the non-deductible debt. And persons who operate unincorporated businesses or who

wish to utilize leveraging strategies can multiply the value of

The Smith Manoeuvre

in dramatic fashion.

You have the debt already. It is bad debt because its interest expense is not tax-deductible. You might as well get

it converted to the good kind of debt – deductible debt. You will enjoy receiving those tax refund cheques. They are free (it

doesn’t cost you anything out of pocket to start earning them) and there is no tax on the proceeds. The conversion from bad

debt to good debt is achieved by the purchase of new investments of your choice, one more very large benefit of

The Smith

Manoeuvre

for your family.

…

The Smith Manoeuvre

is a legal strategy utilizing standard Canada Revenue Agency tax rules. It is available to any

Canadian family with 20% or more equity in their home, or with the ability to engineer 20% or more equity.

The Smith Manoeuvre

utilizes strategies routinely practiced by businesses and wealthy individuals with the assistance

of expensive lawyers and accountants. Finally, via

The Smith Manoeuvre

, ordinary Canadians with ordinary incomes will be

able to enjoy these strategies.

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Make a Change. For You and Your Family. And for Canada

ABOUT THE AUTHOR

Now reach out to your Smith Manoeuvre Certified Professional!

A financially secure Canadian is a financially secure Canada. So join the thousands of Canadians who are already in

the process of converting their bad debt to good debt, or who have already completed the process. You too can enjoy these

financial gains for the benefit of your family, and with these financial gains, you can expect emotional gains - the reduction

in stress levels arising from a deeply embedded and constant worrying about the future cannot be underestimated. It is

liberating!

I would like to note that somewhere it is written that the two leading causes of relationship breakdown and divorce

are issues revolving around sex and money: the two biggest reasons we can’t stay together also happen to be two subjects

that we learn very little or absolutely nothing about in the school system or in our formative years. Now, I can appreciate the

likelihood that some of you may be thinking that you are indeed an expert in one of them already, so start taking care of the

other and you will be rewarded with a secure, stable and happy future.

Robinson graduated from the University of Victoria with a double major in Economics and

Chinese Studies in 1995. During his time at UVic, he also studied Mandarin in Beijing and

Shanghai and upon graduation worked in various sectors in China including international

trade and investment while serving as acting Commercial Counselor at the Canadian

Embassy in Beijing.

After obtaining an International Business MBA from Simon Fraser University in 2003, Robinson

returned again to China to become vice president of The Balloch Group, a boutique

international investment bank based in Beijing, and worked on various projects as diverse as

seaports, steel cable manufacture, lumber joint ventures and hydrogen fuel-cell investment.

He has dined and mingled with the likes of Henry Kissinger, Prime Minister Jean Chretien and

the Premier of China, yet somehow still manages to maintain an air of superiority.

In 2006, Robinson returned to Victoria to work with his father, Fraser, the financial strategist

who pioneered

The Smith Manoeuvre

, where Robinson helped over 500 families implement

the strategy one at a time. In 2018, Robinson sold his investment advisory practice in order to

write Master Your Mortgage for Financial Freedom, the follow-up to his father’s original book, and reach even more Canadians.

Robinson now dedicates his time writing, speaking and training both homeowners and financial professionals in

The Smith

Manoeuvre

strategy in order to continue on with his father’s original mission to give every Canadian homeowner the opportunity to say

“Yes” to the question, “Do you want to make your mortgage tax-deductible?”

He lives in Victoria, BC, with his wife, Heidi, and their dog, Harley.