In 2017, the specialist advised investing rather than liquidating your mortgage loan at all costs, especially when the loan is not expensive. However, she specified that each financial portrait is unique and that you have to make a plan with your planner.

Let’s take the same hypothetical scenario as in 2017: a 42-year-old with a stable annual income of $75,000, a mortgage of $250,000 with a 20-year amortization and accelerated weekly payments. The answer hasn’t changed much.

Considering that this person has an annual savings amount of $15,000, should he put it in the mortgage or in an RRSP? The math is clear: in an RRSP. There is a difference of $108,247 in favor of investing in an RRSP.

Even with the current high interest rates of 6%, we have just proven that with the reimbursement of the tax of the RRSP that we invest in a TFSA, we earn more in the long term with these investments than by reimbursing the mortgage.

When you don’t bother to sit down and calculate with the real amounts, it feels like if the mortgage rate is higher, you have to pay off that debt. But with compound interest and lowering your marginal tax rate with RRSPs, it’s more profitable to work both ways: minimizing the impact of taxes and building your long-term savings for retirement. Making a plan with your planner pays off.

You have to question yourself. What will my retirement income needs be and where will I get them? If I’m betting on my property, that’s assuming the real estate market is going to hold, that it’s going to give me continued growth on my property. Which is not sure. Second, if the income comes solely from the property, it may need to be sold to obtain cash. Unless you can get a line of credit or a reverse mortgage. In the case of the sale of the property, it will be necessary to relocate. Will the remaining capital be sufficient? Third, if I have estate goals, maybe betting on property alone won’t work.

There is a strategy that works well in terms of market volatility and inflation. It was discovered through analyzes over a period of 50 years that it is necessary to privilege periodic purchases by fixed sums rather than once a year. Instead of contributing at the end of the year for an RRSP, it is more profitable in the long term to contribute every month. It makes a difference, because each month I enter the market, so the cost of my share varies each time.

In 2017, the specialist working at National Bank Private Management 1859 favored the repayment of the mortgage, because the staggering returns did not exist and it was necessary to make double the interest of the loan for non-registered investments.

Do you have to pay off the mortgage on a residence that is not tax deductible or put your money in non-registered investments, i.e. not RRSPs and TFSAs? It is obvious that you have to repay your debt, because mathematically, it does not work. In an average mutual fund, when you’re making 6% for 20 years, you’re actually making 4%, because the management fee is about 2% and you have to pay tax on the returns. For guaranteed investment certificates (GICs) and bonds, the rates are always lower than mortgage rates and there is tax to pay. Bonds have management fees.

In TFSA or RRSP, you must also compare the rate of return and the mortgage rate. When you invest in stocks, you expect to make more than the borrowing rate, especially with low-cost index funds. Historically, stocks have always been higher than the borrowing rate. According to IQPF standards, it takes an average of 4.3% for a mortgage and 6.2% in Canadian stocks less fees and less tax. The margin is low for earnings.

When you are on fixed income, this is not possible. Historically, fixed income is lower than the borrowing rate. Unless you have negotiated a rate below 2% in 2020. If you have a 6% mortgage and a 5% investment, you lose 1%.

If you have a surplus of money, in almost all cases the answer is to pay off the mortgage.

The emergency fund in a TFSA will always come first, even if you lose because of lower rates of return than the mortgage. If you lose your job, put it all on the mortgage, you won’t have a bank account to get you through the next six months. Having an account accessible in case of emergency is essential.

You should not change your strategy based on fluctuating rates and inflation. Investing is for the long term. Not to come out of the markets in six months. When you have a mortgage and investments, it is more profitable to be 100% in stocks.

There are plenty of people with a mortgage and a balanced portfolio, 50% bonds and 50% stocks. It’s reassuring, but in reality, they have a hole in their pool with these bonds that are losing them money. They would benefit from selling that 50% bond and paying off their mortgage.