For many Canadians, their mortgage is their biggest monthly expense—and often a missed opportunity. With the right strategies, your mortgage can actually work in your favour, reducing your tax burden, increasing cash flow, and speeding up debt repayment. Here are four powerful strategies that combine mortgage planning with tax-smart thinking.
1. Debt Swap Strategy
The debt swap allows you to convert non-deductible mortgage debt into deductible investment debt:
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Sell non-registered investments and use the proceeds to pay down your mortgage.
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Borrow the same amount back using a secured line of credit (e.g., HELOC).
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Invest the borrowed funds in income-generating assets.
The key benefit is that the interest on the borrowed funds is now tax-deductible. Over time, this can create significant tax savings—provided the funds are invested appropriately and with documentation.
✅ Best For: Investors with large portfolios and substantial equity in their home.
2. Mortgage Offset Strategy (With a Twist)
An offset mortgage links your savings and income directly to your mortgage balance. But we take it a step further.
Here's how it works:
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All your income is deposited into an account that reduces the effective daily mortgage balance.
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Instead of paying expenses immediately, you use credit cards or lines of credit with grace periods (like a 30-day Visa billing cycle).
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This short-term delay allows your income to sit in the offset account longer, reducing the interest accrued daily on your mortgage.
Over time, this strategy can shave 10+ years off your amortization, simply by accelerating principal repayment and minimizing interest costs—without increasing your actual payments.
✅ Best For: Cashflow-positive borrowers looking to pay off their mortgage faster while maintaining liquidity.
3. Cash Damming Strategy x2
This strategy converts non-deductible personal or rental debt into deductible business or investment debt—and we apply it in two powerful ways:
💼 For Business Owners (Classic Cash Damming)
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Use your business income to pay down your personal mortgage.
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Reborrow the same amount from your HELOC and use it for business expenses.
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Now, your HELOC interest becomes tax-deductible, turning personal debt into business debt.
🏠 For Real Estate Investors (Rental Variant)
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Use rental income to pay down your HELOC.
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Reborrow funds from the HELOC to cover property expenses—maintenance, taxes, insurance, etc.
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This converts spending that would have come from after-tax dollars into deductible interest on borrowed funds.
Any CRA refunds from this setup can then be used to reinvest or further reduce mortgage principal.
✅ Best For: Business-for-self professionals and rental property owners looking to maximize tax efficiency.
4. Reverse Mortgages
Reverse mortgages provide retirees with a tax-free way to unlock equity—without triggering capital gains or selling income-generating investments.
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Funds received are not taxable income.
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No repayments required until the property is sold or the borrower passes away.
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Preserves eligibility for income-tested benefits and avoids crystallizing capital gains.
In a rising-rate or inflationary environment, this can be a key retirement planning tool.
✅ Best For: Older homeowners looking to access equity without selling their home or triggering taxable events.
⚠️ A Note of Caution
These are advanced financial strategies. While they’re powerful when used correctly, they require coordination with your accountant or tax advisor to ensure compliance with CRA rules. We’re mortgage professionals, not tax advisors—so before implementing any of these strategies, make sure you get professional tax advice tailored to your situation.
📩 Ready to Put These Strategies to Work?
If you’re curious how these or other advanced strategies could improve your mortgage structure, reduce your tax burden, or accelerate your financial goals, let’s connect.
📬 Email me directly at Scott@TheWestlakeTeam.com to explore how we can tailor a plan that fits your personal or investment portfolio. Whether you're business-for-self, investing in real estate, or planning for retirement, we can help integrate the right structure into your mortgage strategy.
Let’s make your mortgage work for you—not against you.