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Today we'll discuss my decision to invest cash in the stock market vs paying down my mortgage faster.
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I like the freedom of paying off a house. I did and it was the best decision i ever made.
Same!
Paying down the mortgage is also not taxable vs capital gains/taxes on dividends for unregistered accounts
I like using a majority of the excess towards the mortgage, but also leaving a little bit of room to invest. Maybe an 80/20 split
As long as the money earns higher than the mortgage rate (net tax), the decision is simple.
A paid off mortgage gives you a place to live rent free. If rents for comparable property in your area are $3,000/month for example, a paid off house is equivalent to an investment portfolio that returns that much income. You also have the option of a reverse mortgage in retirement. I agree it’s situational – not one size fits all – but know from experience that peace of mind knowing your cashflow requirements are reduced but the asset is still there is worth considering.
I’m 40 – sold one of my properties in BC, took the equity and we moved to Alberta. We got a nicer place, we have a mortgage and I put the balance into investments. I am getting roughly 7000 a month in dividends which allows me to reinvest, and cover my mortgage with my investments. I don’t mind having the debt, it’s serviced and I do have equity in my Alberta home. I just recently accelerated my paydown schedule and I will look at lump sum payments in the future.
Glad to hear I wasn’t the only one who chose a 1.45 variable mortgage and payed the price
a lot of people did including myself – the fixed rates were much higher at the time and the BOC was telling everyone that inflation was transitory. lesson – dont trust central banks
I know your pain. We’re all troopers for going through that rough 2-2.5year
Paying not paid .. 😂😂
Good to see you side by side. Blessings.
This is a great topic. It’s come up with some friends and family. They decided to continue making employer matched retirement investments, RRSP and TFSA contributions. Extra funds invested until the mortgage term is due as the mortgage rate was at least 2/3 lower than any of the investment rates and paying extra money towards the mortgage only reduced interest, not the prinicple so the monthly mortgage payment isn’t reduced. There are so many options depending on your situation.
I think you should consider Smith’s maneuver
I paid off my house while borrowing money for investments which is tax deductible.
Two first years, I did pay the regular mortgage payments. Third year, I am currently paying 500$ extra on top every month and I did start to invest so I prioritized my TFSA.
Fourth year (next year), I do not know… So the video is welcome!
I was thinking maxing out my TFSA and then trying to increase payments to $1000$ extra on top of my mortgage payments. I am a little bit scared of what will happen when my mortgage will renew, I definitely hate the system in Canada compared to the US and most of Europe where you lock your rate for the life of the mortgage.
Thanks a lot for your perspective on the question, that’s helpful to hear that other people are doing a little bit of both, paying the mortgage & investing at the same time.
Richmond… Last place I would buy here, it’s almost sea level, the risk with floods will rise with the coming years especially for the next generation since you have kids.
Brandon the bank you used for your 5yr VRM greatly impacts your mortgage schedule:
Do you have static or adjustable payments? (Was there a trigger rate?)
If you weren’t with Scotia or NBoC and were static (RBC has interest +$5 principal payment) and you hit a trigger rate, you should cover the process of the term renewal. Whether you paid to keep your am on schedule or reset back to 25 or 30 years.
I think paying off the mortgage is a great choice. It will change the way you think. Some many things in your life can change when you don’t have a mortgage and a vehicle payment. I’m in the process of paying off my mortgage and it should be done in the next year. I can’t wait to make that last payment!!!!!!
Living in Qc with a mortgage and no kids.
I do a 24 months rolling financial forecast for me and my wife. And we put 40% of our salary into our investment/paying down mortgage. I would say 60% investments 40% mortgage
Thanks to both of you I was able to discover the investing world and I have made over $30k in dollars cost averaging (S&P, Harvest, Canadian ETFs)
So thankful guys!!! 😎
Why anyone took a variable rate mortgage when rates were so low is beyond me.
Greed.
@@robertstanislausyep..I locked in for 5 at 1.44 and never looked back
Here’s what I’m doing:
We built our dream home in 2020 and locked in a 5yr at 1.92%.
Weekly we deposit into my TFSA and my wife’s RRSP and we pay extra money on our mortgage.
So we’re doing it all 😁😁😁
I think the biggest factor is having a home paid off with a much lower monthly living cost then losing you home and being homeless or having to rent and be paying off somebody else’s mortgage.
With the volatility of the economy and jobs millions of people have had their lives uprooted and basically destroyed with this Liberal insanity that has devastated Canada the last decade the people without a mortgage have been the ones who have been able to survive far better then people trying to find thousands of dollars a month for mortgage or rent
One thing to mention about the Ramsey method is he doesn’t recommend putting all
your money towards the mortgage – but a large portion of your income. 15% goes to investments once you are consumer debt free and the remainder to the mortgage. I’m not a Ramsey diehard but wanted to clarify. Great video guys!
Like they said at the very end, only other thing I MIGHT argue for investing instead of paying down your mortgage (besides the possible better return), is I feel like having the mortgage payment may add just enough motivation to keep you on a tighter budget. I can imagine – and have seen – situation where people free up 2-3k cash flow and instead of investing the remaining difference, just splurge on things they never used to before.