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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Dmy0013 on January 31, 2013, 02:35:48 PM

Title: Extra Mortgage Paypments VS Extra Savings
Post by: Dmy0013 on January 31, 2013, 02:35:48 PM
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Title: Re: Extra Mortgage Paypments VS Extra Savings
Post by: icefr on January 31, 2013, 02:41:10 PM
It depends on how much you don't like debt. How big is your mortgage and how long will it be gone if you can throw $3k extra at it each month? Personally, I would be less interested in investing if my mortgage rate was completely variable like yours versus a 30 year fixed that you can get here in the States.

My mortgage has the rate fixed at 2.5% for the next 5 years and I've been paying it down aggressively, but only after maxing out the tax-advantaged retirement vehicles that I have available to me. Are you maxing out your RRSP and TFSA as well? Or just paying down the mortgage?

Also, I know Canadian mortgages usually have pre-payment penalties. Does yours? That would factor into my math as well.
Title: Re: Extra Mortgage Paypments VS Extra Savings
Post by: Jack on January 31, 2013, 02:47:38 PM
Assuming no prepayment penalty, I'd pay down aggressively until I was below 80% LTV, then refinance to a 30-year fixed and throw everything into investments.

But then again, I like the idea of leverage.
Title: Re: Extra Mortgage Paypments VS Extra Savings
Post by: matt_g on January 31, 2013, 03:04:32 PM
That variable interest rate will kill you when interest rates go back, I'd do anything I could to get that locked into something, especially while rates are low.  After that has been done.

1.  Max out tax advantaged retirement accounts.
2.  Use the rest to pay off the mortgage.
Title: Re: Extra Mortgage Paypments VS Extra Savings
Post by: Deano on January 31, 2013, 04:34:01 PM
How about this, max out your total for TFSA (25,500) and then set automatic savings at the amount that will max you out on it each year. Makes sure you don't stick that money into some low-interest savings account to take advantage of the TFSA.

When that's done, start crushing the mtg again while repaying the RRSP loan as quick as you can, then when you're done roll that amount into the mortgage.

If you lose your 75k a year job, you still have to make mtg payments, your TFSA will help that. You need some resiliency built into your plan.

My take, I'm doing something very similar, except the RRSP's, I have a pension so my contribution room is not so large.