Paying off your Mortgage or Investing
With mortgage rates near record lows, the return on your invested dollar should exceed the guaranteed savings from making additional payments on your home.
- If you don’t own a home.Rent a home and invest until you have enough for the down payment. When buying, buy between your means and wait. Historically in Canada, home prices tend to increase.
- Buy a home that costs you less or equal than you would pay in rent.You need a place to live, but if you’re paying less or the same as what it would cost you in rent, then you effectively get to own the house for free.
- If you are low-risk investor, pay off your home first.Whatever size home you have, pay it off before you invest. This might be effective if you start very young and pay it off very quickly, leaving you many mortgage-free years to invest.
- Invest buying a rental home and let your tenants pay your mortgage.This is the better option if you are moderated to high-risk investor. Time is your best friend for this option as the longer you own your investment the better result you will have. Your down payment and closing cost would be your initial investment. Adding to the initial investment can be the cost of repairs and possible rent losses accumulated through the time you own the property. To make this idea a success you need to educate yourself in the area and get professional help when you need to make decisions.
In theory, investing should be better than debt repayment provided you are a long-term, aggressive investor. But someone with a low-risk tolerance should just pay down the mortgage,” “It’s a high guaranteed rate of return even if your interest rate is only three percent.”
If you need help deciding what to do, I can help you. Call me at 403 990 4817
