Readvanceable Mortgages in Canada
Updated April 2026. A readvanceable mortgage is a HELOC that grows automatically as you pay your mortgage down. Here's how Canada's lineup (Scotia STEP, Manulife One, NBC All-In-One, RBC Homeline, BMO ReadiLine) works, the Smith Manoeuvre tax strategy, and the trade-offs to weigh at renewal.
Key Takeaways
- • Readvanceable = mortgage + HELOC under one collateral charge; HELOC limit automatically increases as mortgage principal drops.
- • Combined limit is capped at 80% of home value, with the HELOC portion capped at 65% LTV.
- • Key Canadian products: Scotia STEP, Manulife One, NBC All-In-One, RBC Homeline, BMO ReadiLine, CIBC Home Power combo, TD collateral bundle.
- • Enables the Smith Manoeuvre — converting non-deductible mortgage interest into tax-deductible investment loan interest.
- • Downsides: collateral charge lock-in, posted-rate temptation, discipline required to avoid permanent indebtedness.
- • Adding one at renewal is possible but harder than at origination — new collateral charge, legal fees, fresh appraisal.
- • Discharge costs $1,000–$2,000 at switch time; switch allowances often cover this if you move to another Big 6.
What Readvanceable Actually Means
A standard Canadian mortgage is a closed-end amortizing loan: you borrow $500,000, pay it down on schedule over 25 years, and you're done. A HELOC is a separate revolving line of credit you have to apply for and qualify for each time you want to increase the limit.
A readvanceable mortgage combines both under a single collateral charge registration — and critically, the HELOC limit grows automatically as you pay down mortgage principal. Every $1,000 of principal repayment reduces your mortgage balance by $1,000 and increases your HELOC limit by $1,000. There's no requalification to access the new room. As long as you're current, the growing HELOC limit is yours to draw on whenever.
The Canadian Readvanceable Lineup
| Product | Lender | Structure | Notable Features |
|---|---|---|---|
| Scotia STEP | Scotiabank | Mortgage + revolving HELOC sub-accounts | Most popular for Smith Manoeuvre; multiple sub-accounts |
| Manulife One | Manulife Bank | Single combined account (chequing + mortgage + HELOC) | Paychecks deposit and reduce mortgage immediately; all-in-one |
| National Bank All-In-One | National Bank | Single combined account, similar to Manulife One | Strong in Quebec; multi-sub-account flexibility |
| RBC Homeline Plan | RBC | Mortgage + HELOC under single collateral charge | Widest branch footprint; strong for newcomers |
| BMO ReadiLine | BMO | Mortgage + readvanceable HELOC combo | Sub-accounts for segregating personal vs. investment |
| CIBC Home Power Plan | CIBC | Mortgage + HELOC combo (not auto-readvancing — apply to increase) | Not fully readvanceable; requires reapplication for limit increases |
| TD Mortgage + HELOC | TD Canada Trust | Two separate products under TD's collateral charge | FlexLine (fully readvanceable) discontinued; manual limit increases |
Product features as of April 2026. Confirm current structure with the specific lender.
The Smith Manoeuvre: Why Advanced Investors Use Readvanceable Mortgages
The Smith Manoeuvre, developed by BC financial planner Fraser Smith, is a Canadian tax strategy that uses a readvanceable mortgage to systematically convert non-deductible mortgage interest (paid on the family home) into tax-deductible investment loan interest. The mechanics:
- Every month you make your regular mortgage payment, reducing mortgage principal by some amount (e.g., $800).
- The readvanceable HELOC limit automatically increases by that same $800.
- You immediately draw that $800 from the HELOC and invest it in a non-registered, income-producing portfolio (dividend stocks, ETFs, etc.).
- Because the HELOC draw was used for investment, the interest paid on that HELOC portion is tax-deductible under Canadian tax rules.
- Over 25 years, the non-deductible mortgage balance slowly shrinks to zero and the tax-deductible HELOC balance grows to the original mortgage amount — with a portfolio attached.
Worked Example: Smith Manoeuvre Tax Savings
Mortgage balance: $500,000 | Amortization: 25 years at 4.79%
Annual principal paydown (year 1): ~$11,000 → HELOC grows by $11,000 → invested
After 10 years: ~$150,000 of HELOC investment balance
Annual HELOC interest at 5.45%: $150,000 × 5.45% = $8,175
Tax deduction at 43% marginal rate: $3,515/year in tax savings
Plus the portfolio itself generates dividends/capital gains taxed at preferential rates.
The Smith Manoeuvre requires discipline (never withdraw from the investment side), proper tax documentation (CRA expects a clear audit trail), and an accountant familiar with the strategy. It's not appropriate for everyone — particularly anyone who might need to draw on investments before mortgage payoff.
Pros and Cons of Readvanceable Mortgages
Pros
- Smith Manoeuvre enables systematic tax savings
- Automatic HELOC growth with no requalification
- Single collateral charge = simpler title over time
- Flexibility to fund renovations, investments, emergencies without reapplying
- Accelerated mortgage payoff if you dump surplus cash in (especially Manulife One / NBC All-In-One)
Cons
- Collateral charge makes switching lenders expensive ($1,000–$2,000)
- Lenders sometimes quote higher posted rates on readvanceable combos
- Temptation to keep drawing — minimum interest-only payments enable permanent indebtedness
- Smith Manoeuvre discipline is hard; accountant fees ($500–$1,500/year) required
- Manulife One-style combined accounts can be confusing to track
Adding a Readvanceable at Renewal
If you're renewing with a lender that already has you on a standard charge mortgage and you want to switch to readvanceable, expect a full re-registration: the existing charge is discharged and a new collateral charge is registered for the full mortgage + HELOC combined limit. This costs $800–$1,500 in legal fees and requires an updated appraisal. Some lenders run a "switch promo" with a rebate that covers these costs.
If you're switching lenders entirely (e.g., moving from a monoline to Scotia STEP), the same process applies — fresh appraisal, new collateral charge, legal registration. This is why adding readvanceability at origination (when you first buy) is much simpler than adding it at renewal or switch. See our switching lenders guide for the mechanics.
How to Discharge a Readvanceable Mortgage
When you eventually leave a readvanceable product — whether to switch lenders at a future renewal, sell the home, or consolidate — the discharge is slightly more involved than a standard mortgage:
- Both the mortgage balance AND any drawn HELOC balance must be paid out in full.
- The collateral charge is discharged (your lawyer handles this).
- New lender registers a new charge (standard or collateral, depending on product).
- Total legal + registration cost: $800–$1,500 typically.
- Prepayment penalty applies to the mortgage portion if mid-term; HELOC portion usually penalty-free.
At renewal this is significantly cheaper because there's no prepayment penalty — just the legal and re-registration costs, which many switch allowances cover in full.
Frequently Asked Questions
What does 'readvanceable' actually mean? +
A readvanceable mortgage is a mortgage + HELOC combo under a single collateral charge, where the HELOC limit automatically grows (readvances) as you pay down mortgage principal. Every $1,000 of principal you pay on the amortizing side increases the HELOC limit by $1,000 — up to the combined 80% LTV cap. Scotia STEP is the most famous example; Manulife One, NBC All-In-One, and RBC Homeline all work on the same principle.
Which Canadian banks sell readvanceable mortgages? +
Scotiabank (STEP), Manulife Bank (Manulife One), National Bank (All-In-One), RBC (Homeline Plan), and BMO (ReadiLine). CIBC's Home Power Plan can be structured similarly. TD's FlexLine was discontinued, though TD still offers mortgage + HELOC bundled under a single collateral charge. All readvanceable products in Canada require a collateral charge registration.
What is the Smith Manoeuvre and how does a readvanceable mortgage enable it? +
The Smith Manoeuvre is a Canadian tax strategy that converts non-deductible mortgage interest into tax-deductible investment loan interest. As you pay down mortgage principal, the readvanceable HELOC limit grows; you draw from the HELOC to invest in income-producing securities, and the interest on that HELOC draw becomes tax-deductible. Over 25 years this can save a high-bracket investor tens of thousands in taxes. Requires discipline and a good accountant.
Can I add a readvanceable mortgage when I switch lenders at renewal? +
Yes, but it's more complex than simply switching a standard-charge mortgage. The new lender must register a new collateral charge (typically for 100%–125% of home value), which means legal fees ($800–$1,500) and a fresh appraisal. Many switch allowances from the new lender cover these costs. Adding readvanceability mid-term to an existing mortgage is not possible — it requires a new collateral charge registration.
What are the downsides of a readvanceable mortgage? +
Three main drawbacks: (1) collateral charge lock-in — switching lenders later requires discharging and re-registering, costing $800–$1,500; (2) posted-rate temptation — lenders often quote readvanceable combos at higher posted rates than standalone mortgages; (3) discipline required — easy access to growing HELOC room tempts borrowers to stay perpetually indebted. Worth it for Smith Manoeuvre users and disciplined investors; overkill for families who just want a simple mortgage.
How do I discharge a readvanceable mortgage if I want to switch? +
At renewal: the new lender's lawyer pays out both the mortgage and HELOC portions, the old lender discharges the collateral charge, and the new lender registers its own charge. Expect $1,000–$2,000 in total legal and appraisal costs, though switch allowances often cover most. Mid-term: same process plus prepayment penalty on the mortgage portion. HELOC portions typically have no prepayment penalty — only the administrative fee on discharge.
Related Guides
Canadian HELOC Guide
HELOC qualifying, rules, and when to pair it with a renewal.
Smith Manoeuvre at Renewal
Converting mortgage interest into tax-deductible interest.
HELOC vs. Refinance Calculator
Accessing equity — HELOC vs. refinance side-by-side.
Collateral vs. Standard Charge
Why your mortgage charge type affects how easily you can switch.
Scotiabank Renewal
Scotiabank STEP renewal mechanics and switching considerations.
National Bank Renewal
National Bank All-In-One and standard mortgage renewals.
Exploring a Readvanceable Mortgage at Renewal?
A licensed mortgage broker can compare STEP, Manulife One, All-In-One, and Homeline side-by-side — free, no obligation.