June 15, 2007, 1:40 am

Did I Just Make a Deal?

by: The Financial Blogger    Category: Properties
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First things first, I would like to express my surprise this morning when I saw that my blog was mentioned on Mr. Larry MacDonald’s blog. Mr. MacDonald is a former economist and a well respected investment writer. He reviewed some of my fellow bloggers such as Ellen Roseman, Financial Jungle and Four Pillars. Hopefully he will have to review and comments my blog one day. Just to say, internet is a beautifull way of communication as you can get in touch with people you wouldn’t imagine!

As financialjungle.com is concerned about housing market in Vancouver, I can’t say the same for Montreal. Our economy growth is way much weaker than our Western fellows but the housing market doesn’t seem to slow down. Here’s what’s happening in my part of the country.


In July 2005, we just had our first son, William. We were living in a nice 5 ½ in Montreal. However, with William in our lives, we were experiencing a lack of space. As we were already saving for a while, we decided it was time for us to move on and buy our first property. Let me tell you, any house is a paradise when you are moving out of an apartment. We rapidly fell in love, made an offer and move couple of months after. My first house! Finally! On top of that, we were paying a cheap price for a brand new cottage. I was ecstatic!


Unfortunately, my moments of joy didn’t last long. I realized after 6 months that it was too small for us if we wanted a second child. It was a cottage with 2 rooms on the second level. I could not have move a young kid in the basement; neither could I move my bedroom nor leave two little babies upstairs. Only six month after we bought, spring season came along with a “For Sale” sign was in front my house.


We also realized that a 2 bedrooms cottage is hard to sell and we didn make that great of a deal when we purchased our first home. We had over 25 visits. They were all saying it was beautiful and that they liked everything about the house… beside the fact that it has only 2 bedrooms. In the end, we had to sell with a real estate agent and dropped the price so we lost about 5K in the sale. It was definitely not the cleverest move I made but I was fed-up with my tiny winy house and wanted to move along.


In the meantime, house market kept on going up and most properties I wanted to buy were not affordable. We finally decided to buy a much bigger house fully equipped in a very nice area. The price was high, too high for us but I decided to make the move anyway thinking I would make more money over time.


Lucky me, my plan worked perfectly. In fact, it worked even better than what was originally planned. Paying the house down is not as big as a burden as I thought. In fact, I’m now doing a Smith Manoeuvre and I’m able to shot $600 a month in it. But my biggest surprise came from the housing market. I recently watched a few properties for sale in the same area and the prices are still going up. After only six months, my house probably worth 25K more. That is a 10% increase in a very short period of time. No wonder why the previous seller didn’t want to decrease their asking price.


In the end, I realized that sometimes you will take a step back to jump further after. I might have lost 5K with my first property but I’m building equity much faster with my second house as the demand for cottages is increasing on Montreal’s south shore. The housing market is still good across Canada for now and I would suggest to some people to refinance their mortgage and use this money to create assets or to invest through a Smith Manoeuvre. With interest rate rising up, you won’t have this kind of opportunity for a while.

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I live in Montreal and work as a mortgage agent, I’ve been looking all over for anybody who knows how to apply the manoeuvre her but couldn’t find anybody, can you please advise if you know a financial planner.
Also I’d like to know which bank and product did you use for the smith manoeuvre.

by: The Financial Blogger | October 10th, 2007 (7:03 pm)

Hi Salwa,

Unfortunately, I don’t know any financial planner that does the Smith Manoeuvre. I do it myself after reading a lot on the subject. I know that the official website of Fraser Smith (Smithman.net) shows a list of financial planners across the country that use the SM. You will probably be able to find somebody there.

In regards to the product I use, I have an All-in-one from National Bank. It is a pure Home Equity Line of Credit offering multiple sub-accounts (you need at least 2 to apply the SM).

Don’t hesitate to contact me if you have any other questions.