Mortgage &LOC question

[melbrujack]

Iam hoping you can help us with this question. Our mortgage is up for renewal. When we were meeting with the bank to discuss, they suggested we combine our mortgage, our personal line of credit and the $77000 line of credit that we have been using for Smith Maneuver. We have just been paying the interest on this Line of credit, and then we can claim this interest(?) on our taxes.
My guess is that if we combined the this line of credit with our mortgage, we could to claim the interest.
We are paying a rate of 4.25 on loc. the bank is offering a rate 3.39 for 5 yr mortgage.
We don't know which way to go with loc.
Please advise if possible.

[i_forget]

Interest on a mortgage is not tax deductible in Canada.

[alicia]

Interest on a mortgage is not tax deductible in Canada.

But if they're doing the Smith Manoeuvre, that's the entire point - to work around the mortgage interest not being taxable, but the HELOC money that you then invest would result in taxable interest, right? I don't have any advice because I am not a wise enough investor to know the answer, but just wanted to clarify that.

[i_forget]

But if they're doing the Smith Manoeuvre, that's the entire point - to work around the mortgage interest not being taxable, but the HELOC money that you then invest would result in taxable interest, right? I don't have any advice because I am not a wise enough investor to know the answer, but just wanted to clarify that.

Really? Thanks for clearing that up.

[alicia]

There's a heck of a lot of risk / risk-tolerance needed for it though. It isn't for the faint of heart. I also don't know the full details of it, but I know I couldn't handle it... I'm not a seasoned enough investor.

[MortgageQueen]

I don`t know much about what`s tax exempt or not, but you could also consider a variable rate (which is about 2.5/2.6%) Prime isn`t likely to move much the next few years and that`s about a 1% rate savings.

[Carlotta]

If you are using the Smith Manoeuver, rolling it into your mortgage would be a huge mistake.
And unless you are a risk taker, you should not use the Smith Manoeuver... if you are willing to take the risk, it can be really effective.

I would leave the $77,000 HELOC alone. Just renew the mortgage. If they wont give you the best rate without rolling it all in, go elsewhere. Since you can write off the interest on the HELOC, who cares what the interest rate is?

[engo]

Iam hoping you can help us with this question. Our mortgage is up for renewal. When we were meeting with the bank to discuss, they suggested we combine our mortgage, our personal line of credit and the $77000 line of credit that we have been using for Smith Maneuver. We have just been paying the interest on this Line of credit, and then we can claim this interest(?) on our taxes.
My guess is that if we combined the this line of credit with our mortgage, we could to claim the interest.
We are paying a rate of 4.25 on loc. the bank is offering a rate 3.39 for 5 yr mortgage.
We don't know which way to go with loc.
Please advise if possible.

When I set up my Smith Maneuver years ago, I had a readvanceable mortgage and HELOC together. My personal line of credit was seperated and not mingled with the mortgage and HELOC.

I would not combine your personal LOC and HELOC with your mortgage. You'll lose the tax destructibility of the interest expenses.