Investment Leverage Calculator
Model the slow conversion of non-deductible mortgage interest into tax-deductible investment-loan interest using a readvanceable mortgage. Each principal payment opens HELOC capacity. The calculator deploys it month by month, runs the portfolio at your assumed return, and rolls annual tax refunds back in if you ask it to.
Net worth gain at amortization end
+$878,846
Difference between the investment portfolio and the HELOC balance at year 25. The mortgage gets paid off in both scenarios. The strategy adds the investment portfolio on top, financed by HELOC interest that's tax-deductible the whole way.
Year by year
Portfolio value, HELOC balance, and net strategy delta over time. The gap between portfolio and HELOC is the value building.
Final portfolio
$1,378,846
Final HELOC balance
$500,000
Total tax refunds
$156,015
Reinvested back into the portfolio.
Strategy mechanics
Net delta turns positive in year 1. Total deductible interest generated over the run: $359,398.
How to read the result
A few thresholds the model can't flag on its own.
- The investment return assumption is the load-bearing input. A 7% assumption vs 6% feels small but compounds dramatically over 15 years. Set the assumption to what you'd defend in front of a judge, not what you'd hope for. Conservative is usually 5 to 6% net of fees, not the 8 to 10% the marketing decks use. If your file requires 8% to pencil, it doesn't pencil.
- A 30% drawdown in year 3 changes the strategy psychologically, not mathematically. The math says you keep the loan and keep claiming the deduction. The household reality is that watching the portfolio drop while the loan stays the same triggers panic-selling at the worst possible moment. Once the investments are sold, you have deductible debt with no income-producing source: the “disappearing source” problem. The model can't price this. Ask yourself if you can hold through a 2008-style drawdown before you start.
- Tracing is the deduction. The model assumes clean account discipline: dedicated investment account, dollar borrowed equals dollar invested, no co-mingling. CRA's ITA 20(1)(c) four-part test checks that the borrowed money is used to earn income, in a defensible structure, with documentation that survives an audit. One personal charge on the investment HELOC contaminates years of structure. The math works only as long as the discipline holds.
- Tax refunds compound the strategy, but only if you redirect them. The model assumes annual refunds flow back at the personal mortgage as principal prepayments. That's where the acceleration comes from. If the refund hits chequing and gets spent on lifestyle, the strategy still works on the deductible-interest side, but the personal-mortgage payoff advantage flattens out. The discipline of automatic redirection at refund time is what makes the long-horizon math hold up.
What this calculator misses
The model assumes smooth monthly returns. Real markets have drawdowns, and a portfolio that drops 30% in year three while you're still drawing on the HELOC creates real psychological and tax pressure. The model also assumes clean tracing: the dollar borrowed is the dollar invested, in a dedicated account, in a defensible asset. CRA cares about that part more than the ratios.
For the strategy explainer in plain English, including who it fits and where it goes wrong, see the strategies page.