You Retirement Goals?

[you&me]

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We have around $550K saved up for retirement. I'm finding whatever piddly amounts I contribute to my RRSP is rather useless now. 20 years still.

Mortgage will be paid off in three years when the term ends. I'm going to lump sum pay off the rest. Paying off early during the term seems to be rather pointless so I'll probably just shove some of that money into a 3 year GIC.

Now for hookers and blow.

I know everyone's priorities and circumstances are different, but can you share you thoughts on paying of a low (or negative) performing asset that's costing you very little in the way of relative interest, while you have 20 years of (hopefully) steady income / cashflow to otherwise make the mortgage payments?

[suntan]

I've thought about that too. It's really the only debt I have left (small car loan and $11K bath reno aside).

I'm not actually sure I'm going to be able to get a good mortgage rate during the next renewal. My wife lost her job and I'm a business owner which means I'm somehow more of a risk than a full-time employee. My wife is working but it's for me and it's not that much money.

Besides, I can then save the money that I would've otherwise spent on the mortgage. Or spend it on two chicks at once.

[msommers]

EQ Bank has a short term 3 month at 3% GIC

[ercchry]

Being self employed just means you have to qualify based on a 2yr average... based on taxed income

Only thing that there is a premium on would be the initial down payment amount and the insurance premium which wouldn’t apply to a renewal

[suntan]

Yeah but will that get me the best rate? Probably not. I had to provide a lot of paperwork last time. And I couldn't get the best rate until my wife's income was added.

Weird because our mortgage is really small. But maybe not because no CMHC so lender takes all the risk.

[ercchry]

No, unless you were being sent to an alternative lender? Rate these days is all based on loan to value. Want the best? 65% loan to value or less... or pay to insure it

[suntan]

I was with CIBC, they offered me some terrible rates, I went with True North.

[ercchry]

Did they put you with their lender, Think Financial?

[Manhattan]

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Why is paying off your term early pointless? You are paying interest monthly, where as if you have the money to pay it off now, you avoid paying that interest.

Paying it off early is pointless unless you need cashflow in the immediate future. I get that it gives a lot of people peace of mind but it's costing them a lot of money. A mortgage only costs you 2 to 3% interest whereas if you put it into a solid long term investment like an index fund you can easily earn 6 to 10% over the long run. Dividends alone should just about cover your mortgage interest and everything else is just gravy. I'm in the boat now where I could say goodbye to the mortgage if I wanted but prefer to keep the mortgage and hold cash & equities. This only works if you put the investments away and don't look at them for 10 to 20 years. The plan falls apart if you have a low risk tolerance or near retirement.

[msommers]

6-10% easily? Which funds?

[89coupe]

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Paying it off early is pointless unless you need cashflow in the immediate future. I get that it gives a lot of people peace of mind but it's costing them a lot of money. A mortgage only costs you 2 to 3% interest whereas if you put it into a solid long term investment like an index fund you can easily earn 6 to 10% over the long run. Dividends alone should just about cover your mortgage interest and everything else is just gravy. I'm in the boat now where I could say goodbye to the mortgage if I wanted but prefer to keep the mortgage and hold cash & equities. This only works if you put the investments away and don't look at them for 10 to 20 years. The plan falls apart if you have a low risk tolerance or near retirement.

I guess it all depends on how much you owe. For me I only had a balance of $143k, it wasn’t beneficial for me to finish out the term and pay interest that I didn’t have to if I just paid the small penalty and discharge the mortgage.

Plus the peace of mind knowing my house is paid off just feels good.

[suntan]

I'll have around 100K left at the end of three years, it's almost a nuisance payment at that point.

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Did they put you with their lender, Think Financial?

Yes.

[JudasJimmy]

I paid my Mortgage off early as well. The penalties are minimal compared to the interest you pay. If you have the cash, then I say paying off mortgage is top priority. Everything is easier when you don't have a mortgage. If you have money, and put it in term deposit at a higher interest rate thinking you are making money? Remember you will have to pay %30ish income tax on all money earned. I crunched the numbers and for me, paying off mortgage early was financially sound.

[Sugarphreak]

..

[msommers]

Wouldn't the interest rate be higher on the HELOC than paying the mortgage as it is now?

[Sugarphreak]

...

[Twin_Cam_Turbo]

My strategy was to hit it hard for the first five years to get it down to lowish interest payments then slow it down and enjoy life a bit more after, but I’m certainly not making 6 figures and my mortgage sum is not huge.

[Masked Bandit]

I've said it before, for the large majority of the general population having your home paid off is a huge psychological boost. The reality is that if you are borrowing money at 3% you need to make a GUARANTEED return of 5% because of taxes on the gains just to break even. I don't see a lot of 5% GICs out there and yes there are investments that will return the same or higher averaged out over many years, but they aren't guaranteed. Nobody can predict what the interest rates will be like in five, ten or fifteen years so pay your debts while you can. Consumer debt is one of the biggest cancers on Western society so any move to eliminate it in any form should be applauded.

[suntan]

I've been paying rent or a mortgage since I was 18. I've had enough of it. Also gives the wife peace of mind.

[90_Shelby]

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I feel like I’m semi retired now. I’m self employed, make my own hours, make a very good living, and have zero debt.

I’m currently looking into diversifying my portfolio more, been heavily invested in the O&G sector for 26 years and I feel it’s time to look elsewhere. The future isn’t looking bright for O&G and I don’t want to lose all my gains on the downslide.

Took me 8 years to pay my house off, best feeling ever.

Now I’m focused on heavily investing. I have to wait 10 more years, my youngest will be in University at that time and then the Wife and I can start travelling the world.

That is my goal, to be able to travel on a whim and see the world.

Big houses and fancy cars don’t get me excited anymore, they seem more like a burden then an enjoyment.

I thought you were buying a new M5? I think a new Competition Series M5 would be exciting and enjoyable.