help please | Mortgages | Discussion forum

Pay it off!
When it comes to your principal residence, debt-free is the only way to safely go.
Since you're obviously doing well at saving money, then save up some more and do your investing later.

If you really think you prefer the GIC, then please give us the specific name of it and a link, so that we can take a look. It sounds like you are maybe referring to a "Market-linked" GIC. With those, the guarantee is rarely, if ever, an annual rate. It is normally a rate for the entire term, which would be .5% annually.

Yes, I looked at the BMO GICs too (briefly) and didn't spot anything that looked like it would pay 2.5% annually guaranteed.

Yes, you could borrow against the house later, although I wouldn't recommend it. The borrowing costs , including fees to set up the mortgage , would be far more than the return , if indeed the return was 2.5% annually. I wouldn't bet my house against any investment that was not secure, and the cost of that security would outweigh the benefits.

Rick said
Pay it off. No contest.  

Compared to a stock-indexed or their newer-flavoured "sibling" GICs, I would agree completely with that statement. However, if one were simply trying to aggressively pay down their mortgage exclusively without investing for retirement and/or for their children's post-secondary education, I would disagree. Over time, with the right asset allocation and typically in passive investments that track stock market indices, you would be wise to probably put 20-30% of your gross, pre-tax income towards the principal+interest of your mortgage and 10-18% of the same towards either (or both) your future retirement and children's post-secondary education future. 🙂

Cheers,
Doug

Long term money should go into equities. But, unfortunately, not everyone has the emotional fortitude to stay invested and be successful in equities.

A while back, one poster wrote that their first investment of $100,000 dropped $500 or ½% after just one week and now wanted out!

I think such people would better off putting money towards their mortgage. They will end up with a higher return than buying equities high and selling them low.

I agree, Norman1, if taking the money and putting it against the mortgage saves you 3% in interest when you could have made 4% in after-tax return in the markets with that money then obviously the latter would have been the better option. And vice-versa. So it all depends, and you can't predict the future, so just make the decision that suits you. And obviously the security or lack thereof of your employment situation plays a role in this, e.g. civil servants (stable, predictable) vs auto-workers (uncertain).

I paid off my mortgage by age 30 just because it was a goal of mine and, in retrospect, I would have more money today if I had extended that by 20 years or so and put that money into the market during that time, assuming I would have matched the general market index. Hindsight.......

I think that for some people paying off the mortgage asap is always the best way because they are very risk averse and they derive additional security and peace of mind by being out of debt. Fair enough, but that's not the same as saying it makes sense financially in every, single case.

In my humble opinion, pay off high interest bearing debt first such as credit cards, other loans and overdraft.

You did not mention your amortization period only the term. Mortgage money is cheap and lowering your amortization period will increase your payments but decrease your interest. The higher payments are going towards principal, not interest which increases the banks bottom line.

Compare amortization periods of 25 years, 15 years, 10 years > use the same interest rate and term for the comparison and notice that the lower the period, the higher the payment, which in turn reduces interest paid to bank and the higher payment is against your principal.