View Full Version : Smith Manoeuvre Now?
2009-08-05, 02:28 PM
What do people think of initiating The Smith Manoeuvre Now? I'm thinking of buying my first home but am not sure if it would be a good idea to initiate the SM with HELOC rates at Prime + 1%. I have heard that there is expectation by some that this rate will come down at some point.
Since I am only 28 right now, I am willing to accept some risk when there is potential for maximizing gains.
If there is anyone else looking into this right now too, what have you found?
2009-08-05, 03:43 PM
I have been researching this opportunity as I am looking to buy my first home as well. One of the important things to look for is that you need to have at least 20% equity in your house before you can start the SM. so if you buy the house for 300k, you need to have at least 20% down or 60k before you can get a HELOC.
2009-08-06, 12:00 PM
Don't end up like all those Americans who thought they could 'afford' a house, just because short-term interest rates were low. Decide on affordability based on a 'normal' mortgage interest rate.
2009-08-06, 02:45 PM
Is it just me, or do stocks seem a bit pricey at these levels?
2009-08-06, 04:15 PM
Agreed, but many have the market pegged near fair values.
I think we are going to trade around a 10% range for the next little while. The lack of stability and lack of clarity in future interest rates would make me hesitant to start the SM now.
I would think the best time to do the SM would be when things are a bit more transparent. Your estimates of how beneficial it would be are more easily calculated, now all three parts of the equation:
1) income/personal tax rate (job losses etc.)
2) HELOC rates (potential for inflation)
3) dividends/fixed income returns (cuts, see MFC)
are all unclear.
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