Should I contribute to my mortgage or RRSP?

Conventional wisdom says make your mortgage a priority.

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by Rob Gerlsbeck and Sarah Efron
January 18th, 2013

Online only.

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Financial planners have debated it for years, but from a pure dollars-and-cents perspective the correct answer is usually to pay your mortgage down first. Every time you make an extra mortgage payment you reduce the amount owed on the principal. If your mortgage interest rate is 5%, paying it off faster is like getting a guaranteed 5% return. Yes, you can get a better return than that in the stock market (if you’re lucky), but it’s not guaranteed. So unless you can find GICs that pay 5%, you may want to attack the mortgage first.

2 comments on “Should I contribute to my mortgage or RRSP?

  1. My shiny new (started Jan 3) 5-year mortgage has a 2.79% rate on it. Should I pay down my mortgage faster or invest in my RRSP first? Is there a online calculator that can help determine which is best?

    Reply

    • My logic would be that if you can get a better return in your RRSP than 2.79% then the RRSP is the way to go. This should mean the RRSP it is, as you could probably get a corporate bond or GIC with a higher return than that!

      Reply

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