I'm 40 - sold one of my properties in BC, took the equity and we moved to Alberta. We got a nicer place, we have a mortgage and I put the balance into investments. I am getting roughly 7000 a month in dividends which allows me to reinvest, and cover my mortgage with my investments. I don't mind having the debt, it's serviced and I do have equity in my Alberta home. I just recently accelerated my paydown schedule and I will look at lump sum payments in the future.
Living in Qc with a mortgage and no kids. I do a 24 months rolling financial forecast for me and my wife. And we put 40% of our salary into our investment/paying down mortgage. I would say 60% investments 40% mortgage Thanks to both of you I was able to discover the investing world and I have made over $30k in dollars cost averaging (S&P, Harvest, Canadian ETFs) So thankful guys!!! 😎
Like they said at the very end, only other thing I MIGHT argue for investing instead of paying down your mortgage (besides the possible better return), is I feel like having the mortgage payment may add just enough motivation to keep you on a tighter budget. I can imagine - and have seen - situation where people free up 2-3k cash flow and instead of investing the remaining difference, just splurge on things they never used to before.
Two first years, I did pay the regular mortgage payments. Third year, I am currently paying 500$ extra on top every month and I did start to invest so I prioritized my TFSA. Fourth year (next year), I do not know... So the video is welcome! I was thinking maxing out my TFSA and then trying to increase payments to $1000$ extra on top of my mortgage payments. I am a little bit scared of what will happen when my mortgage will renew, I definitely hate the system in Canada compared to the US and most of Europe where you lock your rate for the life of the mortgage. Thanks a lot for your perspective on the question, that's helpful to hear that other people are doing a little bit of both, paying the mortgage & investing at the same time. Richmond... Last place I would buy here, it's almost sea level, the risk with floods will rise with the coming years especially for the next generation since you have kids.
Ahh, the father-son duo. Good to see you together. Great video. I find myself throwing the maximum lump sum at my mortgage every year (10% of original mortgage is all that is allowed) and then investing the rest. I'm in my 50's, and I hate relying on the banks if I don't have to. I also want to be mortgage-free when I retire. That strategy helps me sleep at night.
I think paying off the mortgage is a great choice. It will change the way you think. Some many things in your life can change when you don’t have a mortgage and a vehicle payment. I’m in the process of paying off my mortgage and it should be done in the next year. I can’t wait to make that last payment!!!!!!
Here’s what I’m doing: We built our dream home in 2020 and locked in a 5yr at 1.92%. Weekly we deposit into my TFSA and my wife’s RRSP and we pay extra money on our mortgage. So we’re doing it all 😁😁😁
a lot of people did including myself - the fixed rates were much higher at the time and the BOC was telling everyone that inflation was transitory. lesson - dont trust central banks
One of my close friends spent her extra cash paying off her mortgage at an extremely fast rate vs investing. She's 59, hates her job and needs to stay there now because she does not have adequate savings to retire earlier. She is working her way to 60 to beef up her work pension and reach the age to draw CPP, which will cause her to lose on CPP over time. Do both- invest AND make extra payments on your mortgage, IF the rates are in a place that don't make your payments ridiculous.
This is a great topic. It's come up with some friends and family. They decided to continue making employer matched retirement investments, RRSP and TFSA contributions. Extra funds invested until the mortgage term is due as the mortgage rate was at least 2/3 lower than any of the investment rates and paying extra money towards the mortgage only reduced interest, not the prinicple so the monthly mortgage payment isn't reduced. There are so many options depending on your situation.
Just bought a rental townhouse last month and we decided to just pay it all down (cleaned out everything). With the rates the way they are, we wanted to get the mortgage out of the way. Now it’s back to 100% focus on building up the stock portfolio. It’s actually been a really nice reset - sold some losing positions, some winning etc etc. Now I’m almost 100% in simple etfs. Trying to keep it simple and index.
This question has been a lot on my mind the last year I am about 60/40 networth home equity VS portfolio's TFSA's and CASH accounts. in about 18 months ( I will be in my late 40's if God willing)I could either pay - off my mortgage balance in full by selling my securities or keep doing what I have been doing invest monthly and every year throw a lump sum directly onto my principal amount. But like Dave Ramsey always says the peice of mind that comes with no mortgage payment is priceless! Good luck to you all whatever path you end up choosing just have a plan do do what works best for you and yours! God Bless you all and great content and discussions in the comments!
Just started watching your channel (recommended from parallel wealth) & I love the father /son perspectives. It really gives a great idea of how diversified a question this is. Thank you
I think the biggest factor is having a home paid off with a much lower monthly living cost then losing you home and being homeless or having to rent and be paying off somebody else's mortgage. With the volatility of the economy and jobs millions of people have had their lives uprooted and basically destroyed with this Liberal insanity that has devastated Canada the last decade the people without a mortgage have been the ones who have been able to survive far better then people trying to find thousands of dollars a month for mortgage or rent
One thing to mention about the Ramsey method is he doesn’t recommend putting all your money towards the mortgage - but a large portion of your income. 15% goes to investments once you are consumer debt free and the remainder to the mortgage. I’m not a Ramsey diehard but wanted to clarify. Great video guys!
My mortgage came up for renewal last June. I was paying 2.49% interest(fixed). For at least 2 years, I was putting as much into the mortgage that my bank would allow. In June, I was down to just over $43k, sold some of my shares, and paid off my debt. I think fixed mortgages were close to 5%, I wasn't interested in renewing at those prices. For me, the piece of mind is worth it. I still have a fair amount of shares, and now with money freed up, I can buy a few more. Cheers, Rob.
That was actually a big mistake. So you spent 2 years paying off a 2.49% while the stock market grew like 45-50% during 2 years (Oct 22 to Oct 24). Just look at the S&P500. So basically, you should have invested, then when time to renew, you can put that money back into mortgage and keep the extra. Basically, you decided to save 5% instead of earning 45-50%> Therefore its a net loss of 40-45%. Given you are putting it into a TFSA.
@@qifridek Who said I didn't invest? From March 2020 to later in 2023, I was buying a fair few shares. I do have a TFSA. I see what you are trying to say, and maybe I could have done it a bit different, but it's done. I wasn't looking for advice, but here we are...
@@robertz7294 you said you put as much into the mortgage. Basically you focused on saving 2.5% instead on earning more. With high interest, you could have them put on saving account and earn more. Therefore, putting as much you could to save 2.5% instead of a saving account Y like 4 or 6% or stock market at average 25%. I guess you still put some, but every "as much" was a net loss
I am 31 years old, and just sold all of my portfolio for the down payment. I feel sad and empty, since i loved my portfolio and the market. But i will enter my new appartment in 5 days. And right now there is the dilemma for me of starting to build the portfolio again / this time for sure, wont want ot sell it/, or focusing on lowering the morgage. The idea of being in debt for that huge amount of money is really unpleasant for me and markets being at ATH... But in the long term, the markets will give me better return.. /2.18% interest rate currently on my morgage/.
Absolutely love this subject and your breakdown. Paid off home, bought an investment property for zero money down with 20% collateral on our home at 4.99% 3 yr fixed. Is it worth paying it down fast? I don't think so especially with the amazing tax write-offs of having "debt" on an investment.
why would you go with Variable when rates were so low? gee I mean where did you think the rates where going to go after printing a bunch of money? Seems odd I was trying to tell my friends not to
Literally perfect timing. We are about to close on our first property and set a hard budget so we will have extra cash flow monthly. Was wondering this exact question!
I am in the lucky circumstances that I have a nice RRSP and TFSA. We have always added a little bit more to the mortgage repayment, each month, and now we are at the point that I got laid off at almost 63 (good luck finding a job) and we have decided to maybe retire. It is an awful feeling because I was the breadwinner and have enough saved up to pay out the mortgage and free up that bi-weekly pay. My wife wants to hold a small mortgage or even put the money in a LOC. We have options, our financial friends have already drawn up three ways, so I should not feel too bothered by retiring..... To me, it is time to pay off the last little bit of the mortgage and start enjoying our beautiful home, free that money up, invest what we do not need. By the way, it is amazing how little money we really need.
Brandon the bank you used for your 5yr VRM greatly impacts your mortgage schedule: Do you have static or adjustable payments? (Was there a trigger rate?) If you weren’t with Scotia or NBoC and were static (RBC has interest +$5 principal payment) and you hit a trigger rate, you should cover the process of the term renewal. Whether you paid to keep your am on schedule or reset back to 25 or 30 years.
Great discussion! I currently have a cottage that I rent 80% of the time with a mortgage...common advice says don't pay it off...I've even been told to put it in interest only to keep higher cash flow in retirement. Ive been retire for over 2 years now and fortunately have seen some great gains that I could cash out of and pay off the balance. Would love to see some number crunching on the options.
I paid off my mortgage in 4 years. It was the best financial decision I could ever have made. Now all that money goes into my investments and it’s growing faster than it would have if I still had had the mortgage
A paid off mortgage gives you a place to live rent free. If rents for comparable property in your area are $3,000/month for example, a paid off house is equivalent to an investment portfolio that returns that much income. You also have the option of a reverse mortgage in retirement. I agree it's situational - not one size fits all - but know from experience that peace of mind knowing your cashflow requirements are reduced but the asset is still there is worth considering.
I currently live in durham region, basically 30mins from Toronto and i was having a conversation with girlfriend about whether we really even want to own a home because we would basically be rinsing our savings and investments dry to give a 20% downpayment so we dont have insanely mortgages. I feel like on one hand the growth over 25 years that our current investments would do we could end up living off dividends but on the other i hate the idea of throwing away 3k a month in rent to someone else
Started a 25 year mortgage 1998 for a Townhouse BC Lower Mainland. Refinanced about 3 times every 5 years, well we are now 14 years left at age 56. So we turned a 25 year mortgage into 40 years unless we increase our payments again, in 2021 we renewed and I told bank take my 19 year Amortization left into 17 years. And have increase payments once a year. 74% equity and took early retirement at 55 with DB pension after 35 years.
The argument always seems to be that, if the investment return is more than the mortgage rate, one is ahead by investing. But the absolute amount of interest paid, relative to loan amount - even on a very low rate mortgage - is massive in the first years. It's not equivalent to the mortgage rate %, over an annum. It's only truly amortized at that rate if you were to hold it for the entire duration, such as 25 years - which can't be done because it has to be renewed anyway.
I'm in a similar situation as you (age, kids, stage of life, housing costs, ect.), and I've been contemplating this as well. Personally my strategy that I plan on using is to contribute aggressively into a spousal RRSP over the next 15 months, then use all of the tax refunds from that to pour into my mortgage. After 3 years my wife will be able to take that money out tax free (dropping the tax burden from 45% to 0%) and we can allocate a good portion of that to the mortgage. That way, I can still get exposure to the markets and generate some higher returns than my interest rate and have a larger lump at the end of it to do some serious damage to my mortgage. These are tough decisions, but I do tend to lean towards investing over mortgage.
can you go over how do you get tax refunds on spousal rrsp? and how will your wife will be able to get it out of rrsp tax-free? do you mean she'll use it for downpayment on a new property in her name ?
Great video guys, was waiting for this one for last 2-3 yrs! I was also house rich cash poor so decided putting most of our capital to investments. Cash is king. Also using our HELOC to invest in real estate. As others have said, the smith maneuvre allows one to write off all mortgage interest on rental property (or stocks as long as they are income producing). That combined w leverage (using the banks money) can grow yoir portfolio 5 times faster. It might feel good to pay off your mortgage and have no debt, just keep in mind it really inhibits growth and is the difference between one retiring with $1m and one retiring w $10m+
Everyone's situation is different. Investing style, mortgage debt comfort etc and a few others are key factors in these decisions. I moved into a higher real estate market and still have a mortgage. I'm creeping up on retirement now but not to worried about having a mortgage in retirement. Right now I'm skewed to paying the mortgage down faster but I still make room for investing even if little bits at a time. I renew in a few months and that will give me the final number to see if my pension covers all living expenses. Maybe I will just be semi-retired...lol
To me, it's about balance. I have been selling some stocks that I feel that are at all time, "Unusual" highs and that I feel are overweight on in my portfolio, I then apply those gains to my mortgages, thus saving on the interest. This method I feel, allows me to double my gains.
We’ve been doing biweekly payments. We chose fixed but only 3 years so the renewal this year hurt when we went into the 6s (for one year, wait and see approach) Personally I like the idea of building the TFSA and RRSP up again first. Once that’s done I’d prefer to pay mortgage before investing into a taxable account.
Looking forward to seeing you guys at Fincon! You guys are spot on as there is no right or wrong answer. Some people are very uncomfortable with debt and it's better for them to pay off their mortgage quicker. I personally think I will carry low interest mortgage debt until my retirement years. My portfolio definitely groees faster that real estate so I will continue to go with this strategy unless there is a shift in economics that forces me to do something different.
I have a question: What is a difference between BMO balanced ETF portfolio that we buy in. the bank and ZBAL ? bacause the NAV for the one bank sales is almost $19 and a market price is abit higher not $39 like ZBAL !!
taking out variable when rates had nowhere to go but up was very ill-advised. Also so was living in Vancouver where the market is in extreme bubble. Maybe it wasn't the best to do but my mortgage just renewed, options to me were extend on variable or pay off 400k to be debt free in a mix from TFSA, RRSP, cash and non-registered, and have to pay some capital gains tax. I decided to just pay it off. Mind you this was about 14% of my portfolio including the withholding tax so the dent wasn't as big as it would be for some.
Quite interesting video, thank you. My plan is to simply max TFSA annually and allocate whatever left there is on my mortgage. I also have a retirement fund, so RRSP isn't a priority yet.
Have been thinking about this for a while. Have a variable mortgage on a rental property which has been cash flow negative for 2 years now with the rates declining it is coming closer to neutral. Net worth is 60/40 real estate and stocks bonds cash. Opinion of advisors I've asked is to keep investing - don't forego the potential compound growth plus the losses on the rental offset gains in other parts of our portfolio. Decided to take the easy way out - max out TFSA any surplus goes against the mortgage. Being retired we value being debt free but we would have to cash out the TFSA to retire the mortgage and give up flexibility.
Been there. I kept the rental cash flow neutral. The mortgage on the rental is tax deductible. Three year fixed rate. Renewal mortgage difference would be the amount added or subtracted to the tsfa. Almost maxed out. Primary residence is free and clear.
well, investing in collectible comic books should be on the table as well...since my mortgage is 1.94 for another 17 months, I have chosen to invest in stocks AND increase my mortgage payments. and buy some comic books...
Pay down the mortgage, borrow from your HELOC to investment on the stock market in dividend paying stocks and ETFs which will allow you to deduct the interest paid on the HELOC. Use the dividends to pay off those interests and if any amount left over use to paydown your mortgage even more. when the mortgage is paid up, pay down that HELOC and you'll be debt free with a clear house and a very decent investment portfolio.
@@zionluka9549 yes as long as the funds borrowed are invested in a non-tax sheltered account (i.e. a cash account) and your funds are invested in dividend or interest paying stocks, etf, etc. Look up « The Smith Maneuver » …. It does have some risk just like any investment on the stock market but when you do your research right it’s a great accelerator to actually pay down your mortgage, then your HELOC all while building wealth.
@@NnickKification you’re right there are some risks but like any investment you need to do your research on the stocks you invest in … and remember to diversify.
@@zionluka9549 Yes as long as you’re investing the funds in a non tax sheltered account (i.e. a cash acc’t) and the funds are invested in income producing stocks, ETFs, etc that pay dividends or interest. It’s called The Smith Manoeuvre …. Maybe @BeavisWealth could make a video about that tax benefit
I'm a huge fan of the Teo of you, but I have to correct you with regards to Dave Ramsey. They say to invest 15% of your net income, then use the rest to pay off your mortgage first, which is still more than what most people do.
I think excessive freedom can be a scary thing aka paying down all your mortgage. It’s 100% a mindset thing. All driven people and successful people carry a fair share of leverages. Not everyone is intrinsically motivated , and for better or worse, the urge to earn I believe needs to be weighed against the reality of expenses. If I’m making any sense.😅
I would say if you have confidence of maintaining or increasing your income for the duration of your mortgage amortization then it makes sense to continue to investing all of your excess cash unless your mortgage rate is close enough to expected investment return. I would be focusing on building your wealth in your prime years 20-50 and pay down mortgage aggressively closer to retirement like 50-60.
Great to see you guys together and great topic! I've been paying off my mortgage quite aggressively these 2 years since I got it and am now considering slowing that down so I can invest some more too. I also have more equity in my condo than my investments so I think I'm at a point where investing more regularly can be a good thing for my future. Awesome video as always!
My dream is to be mortgage free but I’m not entirely prepared to sacrifice investing in our (myself and husbands) RRSP’s and TFSA’s quite yet. So just like having an auto investment amt go to each of those we put a lump sum on the mortgage. Once that is gone then we can add more to our savings. Planning is key .
You always focus on the mortgage, if you split with your partner, you have something to split and walk away with a better credit score and hopefully some cash...no guarantees .you cannot live in a stock portfolio
in my opinion, housing market crash is imminent due to the high number of individuals who purchased homes above the asking price despite the low interest rates. These buyers find themselves in precarious situations as housing prices decline, leaving them without any equity. If they become unable to afford their homes, foreclosure becomes a likely outcome. Even attempting to sell would not yield any profits. This scenario is expected to impact a significant number of people, particularly in light of the anticipated surge in layoffs and the rapid increase in the cost of living
The price of a home is highly subjective and realtors are the dictators of the home price. Why can’t the government stop their commission profit - they should never be making more than a lawyer!!!!
i will die with a mortgage. My income carries the house expenses . Why worry about a mortgage. My income TFSA alone pays the mortgage. Dont worry baby!
It is a very subjective topic and truly an age dependent answer. We are 66 & 62, built a new home last year valued at $2mm, and have a $625k 30-year mortgage at 5.64% ($3,575 per month). We both have DBPP's, lots of savings & investments. No further cash-flow required. Sold two RE investments (villa in Costa Rica & a 25% 12-unit apartment LP interest in Ontario). That freed up $1.5mm. Pay the mortgage, invest the balance at +8% return and still produce nice additional cash flow for new investment opportunities. Mortgage free for the fifth, (& last), time. The higher risk-taking years are behind us now, so sleep-easy investing without debts is the plan.
in my opinion, housing market crash is imminent due to the high number of individuals who purchased homes above the asking price despite the low interest rates. These buyers find themselves in precarious situations as housing prices decline, leaving them without any equity. If they become unable to afford their homes, foreclosure becomes a likely outcome. Even attempting to sell would not yield any profits. This scenario is expected to impact a significant number of people, particularly in light of the anticipated surge in layoffs and the rapid increase in the cost of living
I'm 40 - sold one of my properties in BC, took the equity and we moved to Alberta. We got a nicer place, we have a mortgage and I put the balance into investments. I am getting roughly 7000 a month in dividends which allows me to reinvest, and cover my mortgage with my investments. I don't mind having the debt, it's serviced and I do have equity in my Alberta home. I just recently accelerated my paydown schedule and I will look at lump sum payments in the future.
You are getting $7000 a month in dividends?? You must have multi millions invested or very high risk?
@@Freedom2035 I use ETF's from Harvest, I actually learned about their offerings from Beavis wealth
Deff at least 1.5mil kn a portfolio making 5% so something like a growth fund or even s&p500, easily achievable given your pot of $$ @@Freedom2035
What stock do you have it invested in?
@@larissabui look at the Harvest products, you can search their highest paying divs by etf type. I have a range of them.
Living in Qc with a mortgage and no kids.
I do a 24 months rolling financial forecast for me and my wife. And we put 40% of our salary into our investment/paying down mortgage. I would say 60% investments 40% mortgage
Thanks to both of you I was able to discover the investing world and I have made over $30k in dollars cost averaging (S&P, Harvest, Canadian ETFs)
So thankful guys!!! 😎
Like they said at the very end, only other thing I MIGHT argue for investing instead of paying down your mortgage (besides the possible better return), is I feel like having the mortgage payment may add just enough motivation to keep you on a tighter budget. I can imagine - and have seen - situation where people free up 2-3k cash flow and instead of investing the remaining difference, just splurge on things they never used to before.
Two first years, I did pay the regular mortgage payments. Third year, I am currently paying 500$ extra on top every month and I did start to invest so I prioritized my TFSA.
Fourth year (next year), I do not know... So the video is welcome!
I was thinking maxing out my TFSA and then trying to increase payments to $1000$ extra on top of my mortgage payments. I am a little bit scared of what will happen when my mortgage will renew, I definitely hate the system in Canada compared to the US and most of Europe where you lock your rate for the life of the mortgage.
Thanks a lot for your perspective on the question, that's helpful to hear that other people are doing a little bit of both, paying the mortgage & investing at the same time.
Richmond... Last place I would buy here, it's almost sea level, the risk with floods will rise with the coming years especially for the next generation since you have kids.
I like the freedom of paying off a house. I did and it was the best decision i ever made.
Same!
I am trying to do now!!! I can't wait.
Ahh, the father-son duo. Good to see you together. Great video. I find myself throwing the maximum lump sum at my mortgage every year (10% of original mortgage is all that is allowed) and then investing the rest. I'm in my 50's, and I hate relying on the banks if I don't have to. I also want to be mortgage-free when I retire. That strategy helps me sleep at night.
I think paying off the mortgage is a great choice. It will change the way you think. Some many things in your life can change when you don’t have a mortgage and a vehicle payment. I’m in the process of paying off my mortgage and it should be done in the next year. I can’t wait to make that last payment!!!!!!
Here’s what I’m doing:
We built our dream home in 2020 and locked in a 5yr at 1.92%.
Weekly we deposit into my TFSA and my wife’s RRSP and we pay extra money on our mortgage.
So we’re doing it all 😁😁😁
Glad to hear I wasn’t the only one who chose a 1.45 variable mortgage and payed the price
a lot of people did including myself - the fixed rates were much higher at the time and the BOC was telling everyone that inflation was transitory. lesson - dont trust central banks
I know your pain. We’re all troopers for going through that rough 2-2.5year
Paying not paid .. 😂😂
Don’t worry you are not alone. I also took variable rate mortgage. But, I bought a smaller house.
That would be "paid".
Wow $7k is wild! I love fixed rate mortgages for this reason...I just hate surprises
One of my close friends spent her extra cash paying off her mortgage at an extremely fast rate vs investing. She's 59, hates her job and needs to stay there now because she does not have adequate savings to retire earlier. She is working her way to 60 to beef up her work pension and reach the age to draw CPP, which will cause her to lose on CPP over time. Do both- invest AND make extra payments on your mortgage, IF the rates are in a place that don't make your payments ridiculous.
As long as the money earns higher than the mortgage rate (net tax), the decision is simple.
Good to see you side by side. Blessings.
I paid off my house while borrowing money for investments which is tax deductible.
This is a great topic. It's come up with some friends and family. They decided to continue making employer matched retirement investments, RRSP and TFSA contributions. Extra funds invested until the mortgage term is due as the mortgage rate was at least 2/3 lower than any of the investment rates and paying extra money towards the mortgage only reduced interest, not the prinicple so the monthly mortgage payment isn't reduced. There are so many options depending on your situation.
Just bought a rental townhouse last month and we decided to just pay it all down (cleaned out everything). With the rates the way they are, we wanted to get the mortgage out of the way. Now it’s back to 100% focus on building up the stock portfolio. It’s actually been a really nice reset - sold some losing positions, some winning etc etc. Now I’m almost 100% in simple etfs. Trying to keep it simple and index.
Amazing!!! ETFs are the way to go! Which ones are your faves? Can't go wrong with an S&P500 ETF
@@MTLmevans for me: TPU, TEC and some TTP. (I use TD EasyTrade so I have to pick TD ETFs)
Why anyone took a variable rate mortgage when rates were so low is beyond me.
Greed.
@@robertstanislausyep..I locked in for 5 at 1.44 and never looked back
By trusting that the mortgage broker knew better than me and I should listen to professional advice
This question has been a lot on my mind the last year I am about 60/40 networth home equity VS portfolio's TFSA's and CASH accounts. in about 18 months ( I will be in my late 40's if God willing)I could either pay - off my mortgage balance in full by selling my securities or keep doing what I have been doing invest monthly and every year throw a lump sum directly onto my principal amount. But like Dave Ramsey always says the peice of mind that comes with no mortgage payment is priceless! Good luck to you all whatever path you end up choosing just have a plan do do what works best for you and yours! God Bless you all and great content and discussions in the comments!
Paying down the mortgage is also not taxable vs capital gains/taxes on dividends for unregistered accounts
Just started watching your channel (recommended from parallel wealth) & I love the father /son perspectives. It really gives a great idea of how diversified a question this is. Thank you
Welcome aboard! Appreciate you having a look.
I think the biggest factor is having a home paid off with a much lower monthly living cost then losing you home and being homeless or having to rent and be paying off somebody else's mortgage.
With the volatility of the economy and jobs millions of people have had their lives uprooted and basically destroyed with this Liberal insanity that has devastated Canada the last decade the people without a mortgage have been the ones who have been able to survive far better then people trying to find thousands of dollars a month for mortgage or rent
I like using a majority of the excess towards the mortgage, but also leaving a little bit of room to invest. Maybe an 80/20 split
One thing to mention about the Ramsey method is he doesn’t recommend putting all
your money towards the mortgage - but a large portion of your income. 15% goes to investments once you are consumer debt free and the remainder to the mortgage. I’m not a Ramsey diehard but wanted to clarify. Great video guys!
My mortgage came up for renewal last June. I was paying 2.49% interest(fixed). For at least 2 years, I was putting as much into the mortgage that my bank would allow. In June, I was down to just over $43k, sold some of my shares, and paid off my debt. I think fixed mortgages were close to 5%, I wasn't interested in renewing at those prices. For me, the piece of mind is worth it. I still have a fair amount of shares, and now with money freed up, I can buy a few more. Cheers, Rob.
That was actually a big mistake. So you spent 2 years paying off a 2.49% while the stock market grew like 45-50% during 2 years (Oct 22 to Oct 24). Just look at the S&P500.
So basically, you should have invested, then when time to renew, you can put that money back into mortgage and keep the extra.
Basically, you decided to save 5% instead of earning 45-50%>
Therefore its a net loss of 40-45%.
Given you are putting it into a TFSA.
@@qifridek Who said I didn't invest? From March 2020 to later in 2023, I was buying a fair few shares. I do have a TFSA. I see what you are trying to say, and maybe I could have done it a bit different, but it's done. I wasn't looking for advice, but here we are...
@@robertz7294 you said you put as much into the mortgage. Basically you focused on saving 2.5% instead on earning more. With high interest, you could have them put on saving account and earn more.
Therefore, putting as much you could to save 2.5% instead of a saving account Y like 4 or 6% or stock market at average 25%.
I guess you still put some, but every "as much" was a net loss
@@qifridek, that's given we'd all known ahead of time the market would grow😊
I think you should consider Smith's maneuver
Thank you for this video.
Could you have another video to also add balance between stocks, mortgage, and investment properties?
I am 31 years old, and just sold all of my portfolio for the down payment. I feel sad and empty, since i loved my portfolio and the market.
But i will enter my new appartment in 5 days.
And right now there is the dilemma for me of starting to build the portfolio again / this time for sure, wont want ot sell it/, or focusing on lowering the morgage.
The idea of being in debt for that huge amount of money is really unpleasant for me and markets being at ATH...
But in the long term, the markets will give me better return.. /2.18% interest rate currently on my morgage/.
Absolutely love this subject and your breakdown. Paid off home, bought an investment property for zero money down with 20% collateral on our home at 4.99% 3 yr fixed. Is it worth paying it down fast? I don't think so especially with the amazing tax write-offs of having "debt" on an investment.
why would you go with Variable when rates were so low? gee I mean where did you think the rates where going to go after printing a bunch of money? Seems odd I was trying to tell my friends not to
Literally perfect timing. We are about to close on our first property and set a hard budget so we will have extra cash flow monthly. Was wondering this exact question!
I am in the lucky circumstances that I have a nice RRSP and TFSA. We have always added a little bit more to the mortgage repayment, each month, and now we are at the point that I got laid off at almost 63 (good luck finding a job) and we have decided to maybe retire. It is an awful feeling because I was the breadwinner and have enough saved up to pay out the mortgage and free up that bi-weekly pay. My wife wants to hold a small mortgage or even put the money in a LOC. We have options, our financial friends have already drawn up three ways, so I should not feel too bothered by retiring..... To me, it is time to pay off the last little bit of the mortgage and start enjoying our beautiful home, free that money up, invest what we do not need. By the way, it is amazing how little money we really need.
Brandon the bank you used for your 5yr VRM greatly impacts your mortgage schedule:
Do you have static or adjustable payments? (Was there a trigger rate?)
If you weren’t with Scotia or NBoC and were static (RBC has interest +$5 principal payment) and you hit a trigger rate, you should cover the process of the term renewal. Whether you paid to keep your am on schedule or reset back to 25 or 30 years.
Great discussion! I currently have a cottage that I rent 80% of the time with a mortgage...common advice says don't pay it off...I've even been told to put it in interest only to keep higher cash flow in retirement. Ive been retire for over 2 years now and fortunately have seen some great gains that I could cash out of and pay off the balance. Would love to see some number crunching on the options.
I paid off my mortgage in 4 years. It was the best financial decision I could ever have made. Now all that money goes into my investments and it’s growing faster than it would have if I still had had the mortgage
A paid off mortgage gives you a place to live rent free. If rents for comparable property in your area are $3,000/month for example, a paid off house is equivalent to an investment portfolio that returns that much income. You also have the option of a reverse mortgage in retirement. I agree it's situational - not one size fits all - but know from experience that peace of mind knowing your cashflow requirements are reduced but the asset is still there is worth considering.
I currently live in durham region, basically 30mins from Toronto and i was having a conversation with girlfriend about whether we really even want to own a home because we would basically be rinsing our savings and investments dry to give a 20% downpayment so we dont have insanely mortgages. I feel like on one hand the growth over 25 years that our current investments would do we could end up living off dividends but on the other i hate the idea of throwing away 3k a month in rent to someone else
Started a 25 year mortgage 1998 for a Townhouse BC Lower Mainland. Refinanced about 3 times every 5 years, well we are now 14 years left at age 56. So we turned a 25 year mortgage into 40 years unless we increase our payments again, in 2021 we renewed and I told bank take my 19 year Amortization left into 17 years. And have increase payments once a year. 74% equity and took early retirement at 55 with DB pension after 35 years.
Awesome video! So informative
Too many edit cuts... Why cut in just a single word???
The argument always seems to be that, if the investment return is more than the mortgage rate, one is ahead by investing. But the absolute amount of interest paid, relative to loan amount - even on a very low rate mortgage - is massive in the first years. It's not equivalent to the mortgage rate %, over an annum. It's only truly amortized at that rate if you were to hold it for the entire duration, such as 25 years - which can't be done because it has to be renewed anyway.
I'm in a similar situation as you (age, kids, stage of life, housing costs, ect.), and I've been contemplating this as well. Personally my strategy that I plan on using is to contribute aggressively into a spousal RRSP over the next 15 months, then use all of the tax refunds from that to pour into my mortgage. After 3 years my wife will be able to take that money out tax free (dropping the tax burden from 45% to 0%) and we can allocate a good portion of that to the mortgage.
That way, I can still get exposure to the markets and generate some higher returns than my interest rate and have a larger lump at the end of it to do some serious damage to my mortgage.
These are tough decisions, but I do tend to lean towards investing over mortgage.
can you go over how do you get tax refunds on spousal rrsp? and how will your wife will be able to get it out of rrsp tax-free? do you mean she'll use it for downpayment on a new property in her name ?
i was hit hard on this as well... Thanks for the great input on this topic. Glad to see you both collaborating on a video together. its great
Great to see you two and hear both perspectives ☀️🥂🇨🇦
Great video guys, was waiting for this one for last 2-3 yrs! I was also house rich cash poor so decided putting most of our capital to investments. Cash is king. Also using our HELOC to invest in real estate. As others have said, the smith maneuvre allows one to write off all mortgage interest on rental property (or stocks as long as they are income producing). That combined w leverage (using the banks money) can grow yoir portfolio 5 times faster. It might feel good to pay off your mortgage and have no debt, just keep in mind it really inhibits growth and is the difference between one retiring with $1m and one retiring w $10m+
Depends so much on where you are in your ammoritization schedule.
Everyone's situation is different. Investing style, mortgage debt comfort etc and a few others are key factors in these decisions.
I moved into a higher real estate market and still have a mortgage. I'm creeping up on retirement now but not to worried about having a mortgage in retirement. Right now I'm skewed to paying the mortgage down faster but I still make room for investing even if little bits at a time. I renew in a few months and that will give me the final number to see if my pension covers all living expenses. Maybe I will just be semi-retired...lol
To me, it's about balance. I have been selling some stocks that I feel that are at all time, "Unusual" highs and that I feel are overweight on in my portfolio, I then apply those gains to my mortgages, thus saving on the interest. This method I feel, allows me to double my gains.
We’ve been doing biweekly payments. We chose fixed but only 3 years so the renewal this year hurt when we went into the 6s (for one year, wait and see approach)
Personally I like the idea of building the TFSA and RRSP up again first. Once that’s done I’d prefer to pay mortgage before investing into a taxable account.
Looking forward to seeing you guys at Fincon!
You guys are spot on as there is no right or wrong answer. Some people are very uncomfortable with debt and it's better for them to pay off their mortgage quicker. I personally think I will carry low interest mortgage debt until my retirement years. My portfolio definitely groees faster that real estate so I will continue to go with this strategy unless there is a shift in economics that forces me to do something different.
Who is this by the way?? 😃
I have a question: What is a difference between BMO balanced ETF portfolio that we buy in. the bank and ZBAL ? bacause the NAV for the one bank sales is almost $19 and a market price is abit higher not $39 like ZBAL !!
taking out variable when rates had nowhere to go but up was very ill-advised. Also so was living in Vancouver where the market is in extreme bubble. Maybe it wasn't the best to do but my mortgage just renewed, options to me were extend on variable or pay off 400k to be debt free in a mix from TFSA, RRSP, cash and non-registered, and have to pay some capital gains tax. I decided to just pay it off. Mind you this was about 14% of my portfolio including the withholding tax so the dent wasn't as big as it would be for some.
Quite interesting video, thank you. My plan is to simply max TFSA annually and allocate whatever left there is on my mortgage. I also have a retirement fund, so RRSP isn't a priority yet.
Have been thinking about this for a while. Have a variable mortgage on a rental property which has been cash flow negative for 2 years now with the rates declining it is coming closer to neutral. Net worth is 60/40 real estate and stocks bonds cash. Opinion of advisors I've asked is to keep investing - don't forego the potential compound growth plus the losses on the rental offset gains in other parts of our portfolio. Decided to take the easy way out - max out TFSA any surplus goes against the mortgage. Being retired we value being debt free but we would have to cash out the TFSA to retire the mortgage and give up flexibility.
Been there. I kept the rental cash flow neutral. The mortgage on the rental is tax deductible. Three year fixed rate. Renewal mortgage difference would be the amount added or subtracted to the tsfa. Almost maxed out. Primary residence is free and clear.
well, investing in collectible comic books should be on the table as well...since my mortgage is 1.94 for another 17 months, I have chosen to invest in stocks AND increase my mortgage payments. and buy some comic books...
Pay down the mortgage, borrow from your HELOC to investment on the stock market in dividend paying stocks and ETFs which will allow you to deduct the interest paid on the HELOC. Use the dividends to pay off those interests and if any amount left over use to paydown your mortgage even more. when the mortgage is paid up, pay down that HELOC and you'll be debt free with a clear house and a very decent investment portfolio.
that’s a bit risky but i like the idea
Can you write off the interest on the heloc on your primary home ?
@@zionluka9549 yes as long as the funds borrowed are invested in a non-tax sheltered account (i.e. a cash account) and your funds are invested in dividend or interest paying stocks, etf, etc. Look up « The Smith Maneuver » …. It does have some risk just like any investment on the stock market but when you do your research right it’s a great accelerator to actually pay down your mortgage, then your HELOC all while building wealth.
@@NnickKification you’re right there are some risks but like any investment you need to do your research on the stocks you invest in … and remember to diversify.
@@zionluka9549 Yes as long as you’re investing the funds in a non tax sheltered account (i.e. a cash acc’t) and the funds are invested in income producing stocks, ETFs, etc that pay dividends or interest. It’s called The Smith Manoeuvre …. Maybe @BeavisWealth could make a video about that tax benefit
I'm a huge fan of the Teo of you, but I have to correct you with regards to Dave Ramsey. They say to invest 15% of your net income, then use the rest to pay off your mortgage first, which is still more than what most people do.
Thanks for that correction with Dave Ramsey. Appreciate your support!
Great topic. Thank you both
I think excessive freedom can be a scary thing aka paying down all your mortgage. It’s 100% a mindset thing. All driven people and successful people carry a fair share of leverages. Not everyone is intrinsically motivated , and for better or worse, the urge to earn I believe needs to be weighed against the reality of expenses. If I’m making any sense.😅
Interesting perspective! Great to hear your thought process on this one.
Thanks, Kyle. Cheers.
I would say if you have confidence of maintaining or increasing your income for the duration of your mortgage amortization then it makes sense to continue to investing all of your excess cash unless your mortgage rate is close enough to expected investment return. I would be focusing on building your wealth in your prime years 20-50 and pay down mortgage aggressively closer to retirement like 50-60.
I am paying extra for the same reasons Brandon mentioned, and hoping to stop the extra payments likely after Dec rate cuts
Great to see you guys together and great topic! I've been paying off my mortgage quite aggressively these 2 years since I got it and am now considering slowing that down so I can invest some more too. I also have more equity in my condo than my investments so I think I'm at a point where investing more regularly can be a good thing for my future. Awesome video as always!
I do both
My dream is to be mortgage free but I’m not entirely prepared to sacrifice investing in our (myself and husbands)
RRSP’s and TFSA’s quite yet.
So just like having an auto investment amt go to each of those we put a lump sum on the mortgage.
Once that is gone then we can add more to our savings.
Planning is key .
You always focus on the mortgage, if you split with your partner, you have something to split and walk away with a better credit score and hopefully some cash...no guarantees .you cannot live in a stock portfolio
in my opinion, housing market crash is imminent due to the high number of individuals who purchased homes above the asking price despite the low interest rates. These buyers find themselves in precarious situations as housing prices decline, leaving them without any equity. If they become unable to afford their homes, foreclosure becomes a likely outcome. Even attempting to sell would not yield any profits. This scenario is expected to impact a significant number of people, particularly in light of the anticipated surge in layoffs and the rapid increase in the cost of living
The price of a home is highly subjective and realtors are the dictators of the home price. Why can’t the government stop their commission profit - they should never be making more than a lawyer!!!!
You are from my home province MB? Whoa!
Pay off the mortgage. Duh. In canada, mortgages are 5.5%, so unless you can beat that return, PLEASE focus on paying off your debt
Both via smith manoeuvre.
Being mortgage poor isn’t all bad if you blow through available cash & house is increasing 🤷
Invest instead of paying off your mortgage.
25 points, but I’m guessing.
i will die with a mortgage. My income carries the house expenses . Why worry about a mortgage. My income TFSA alone pays the mortgage. Dont worry baby!
Did I hear you’re originally from Manitoba??
Imagine you’re sitting in your fully paid off home. Now, ask yourself - would you borrow money against your home to invest it in the stock market?
Ok Dave, that's enough outta you
@@bailey-k6b haha nice and yes touché
It is a very subjective topic and truly an age dependent answer. We are 66 & 62, built a new home last year valued at $2mm, and have a $625k 30-year mortgage at 5.64% ($3,575 per month). We both have DBPP's, lots of savings & investments. No further cash-flow required. Sold two RE investments (villa in Costa Rica & a 25% 12-unit apartment LP interest in Ontario). That freed up $1.5mm.
Pay the mortgage, invest the balance at +8% return and still produce nice additional cash flow for new investment opportunities. Mortgage free for the fifth, (& last), time. The higher risk-taking years are behind us now, so sleep-easy investing without debts is the plan.
No right way to do it but I think the best way is to leave Canada - just my opinion ;)
and going where ?
HOW ABOUT WE STOP ALLOWING REALTORS TO COMMISSION THEIR PROFITS WHICH WOULD REDUCE THE RIDICULOUS HOME PRICES
in my opinion, housing market crash is imminent due to the high number of individuals who purchased homes above the asking price despite the low interest rates. These buyers find themselves in precarious situations as housing prices decline, leaving them without any equity. If they become unable to afford their homes, foreclosure becomes a likely outcome. Even attempting to sell would not yield any profits. This scenario is expected to impact a significant number of people, particularly in light of the anticipated surge in layoffs and the rapid increase in the cost of living
HOW ABOUT WE STOP ALLOWING REALTORS TO COMMISSION THEIR PROFITS WHICH WOULD REDUCE THE RIDICULOUS HOME PRICES