Consensus on mortgage renewal: pay down balance and renew, or renew as is?

[ee2k]

My mortgage is up for renewal, approximately $150K. I have cash that I can use to draw it down and then renew on a new lower amount. Or I can invest the cash elsewhere. What's the consensus lately, pay down the mortgage as fast as possible (including throwing whatever I can at it?) or invest elsewhere?

[ExtraSlow]

I'm a firm believer that paying down your mortgage is the simplest and least risky method for most individuals to invest. Since most other forms of investing carry some risk, and paying down your mortgage does not, it's more valuable than it might appear on a percentage basis.

[killramos]

That and it’s very tax efficient. Its effectively an above market ( becuase the net return on paying down the mortgage is not taxable ) risk free investment.

I guess a question would be, if you didn’t have the cash and the mortgage was lower would you be comfortable borrowing that money to invest?

Because that’s effectively the choice you are making ( without the tax benefits of being able to write off the interest on the borrowed money you are investing).

Even if the answer is yes, I would consider paying down the mortgage and pulling the money back out on a HELOC to invest and write off the interest. The write off should offset the premium on the heloc versus the mortgage rate.

[KrisYYC]

I agree with ExtraSlow and Killramos. I'd pay down the mortgage as fast as possible, especially at current rates you'd be renewing at. Being mortgage free gives you great options to invest even more of your income or Killramos' HELOC method. And if you decide not to invest at all you have the huge peace of mind of being mortgage free.

What motivated me to pay mine down faster was using the mortgage calculator to calculate how much total interest I'd pay over the full length of a 25 year mortgage. It's pretty gross.

[phreezee]

Agree with the previous posts. You're almost at the finish line, get'er done.

[max_boost]

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I'm a firm believer that paying down your mortgage is the simplest and least risky method for most individuals to invest. Since most other forms of investing carry some risk, and paying down your mortgage does not, it's more valuable than it might appear on a percentage basis.

At 7% prime yes lol
When it was 2-3%, spy was the way

[Twin_Cam_Turbo]

Yep with the rates now and such a small balance I’d just pound out the last of the mortgage.

[max_boost]

There is something to be mortgage free tho, it’s a nice feeling …. Until your wife spouse partner wants to level up lol
I’m in a tiny condo and paid and probably be here forever at this rate lol

[pheoxs]

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My mortgage is up for renewal, approximately $150K. I have cash that I can use to draw it down and then renew on a new lower amount. Or I can invest the cash elsewhere. What's the consensus lately, pay down the mortgage as fast as possible (including throwing whatever I can at it?) or invest elsewhere?

What rates are you looking at for your renewal? Probably 5% or so? So you have the option for a guarantied 5% return with after-tax money. To beat that you either need to get better than 5% returns in a TFSA or you need to beat 7-8% in a non-registered account (as you have to pay capital gains tax).

The stock market does great but with things being volatile and talks of both a recession or another wave of runaway inflation it seems a no brainer to just pay down the mortgage and chill. I'm always in the camp of pay down your primary residence as it's the best low risk investment then use investments as higher risk elsewhere. The day you cut your monthly bills down heavily by having no debt is such a huge weight off regardless of where life goes. Lose your job some day? Cool it costs almost nothing to live so you can ride it out with a lot less stress than someone that still needs to pay 2-3k a month on their mortgage.

[ExtraSlow]

I also think most people greatly overestimate how smart they are, and greatly underestimate the risks of alternatives. There's a lot to be said for simplifying your financial situation.

[tonytiger55]

Pay down the mortgage. Then renew and make extra weekly payments if you can.

[Sugarphreak]

Where are the people advocating for HELOC and YOLO? Where is the Beyond I know and love?

Solid advice in here... pay it down. Interest rates are too high to be leveraging as an investment

[max_boost]

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Where are the people advocating for HELOC and YOLO? Where is the Beyond I know and love?

Solid advice in here... pay it down. Interest rates are too high to be leveraging as an investment

heloc i just can't lol 7.7% there's no yolo
but those days when it was 3% for a decade, ya know it was dope times
remember when days were like that? just 2 years ago actually haha

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I also think most people greatly overestimate how smart they are, and greatly underestimate the risks of alternatives. There's a lot to be said for simplifying your financial situation.

wasted 15 years of compound interest cuz i thought i could beat the spy haha

[Thaco]

so, to piggy back off this, is it advisable to pay off the mortgage on a income property? we can write off the mortgage insterest so i assume that's still best to pay it as slow as possible.

[tonytiger55]

Have anyone done the Smith maneuver? Take remaining balance of the mortgage, pay it off using the HELOC. Then having your salary put into the HELOC and expenses out of that?
Im looking at it and trying to run the numbers to see if there is any savings.

[Sugarphreak]

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so, to piggy back off this, is it advisable to pay off the mortgage on a income property? we can write off the mortgage insterest so i assume that's still best to pay it as slow as possible.

My gut feeling is that keeping a small mortgage on it will continue to have a tax advantage that is greater than the interest cost

In the current climate, you'd want to reduce the mortgage if you are able to do that though

[Buster]

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so, to piggy back off this, is it advisable to pay off the mortgage on a income property? we can write off the mortgage insterest so i assume that's still best to pay it as slow as possible.

best asset class.

[killramos]

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Have anyone done the Smith maneuver? Take remaining balance of the mortgage, pay it off using the HELOC. Then having your salary put into the HELOC and expenses out of that?
Im looking at it and trying to run the numbers to see if there is any savings.

Smith maneuver has nothing to do with your salaries and expenses.

It only works if you can write off the HELOC interest against investment income.

[pheoxs]

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so, to piggy back off this, is it advisable to pay off the mortgage on a income property? we can write off the mortgage insterest so i assume that's still best to pay it as slow as possible.

In that case because you can use the interest as a deduction you're probably better off investing the money (especially so if you have TFSA room).

100k owing on a rental house @ 5.5% interest means you pay $5,500 interest. Claim it on your tax and get however much back, let's call it 1,500. So you 'lose' 4 grand out of your pocket but if you flip and invest that 100k in a TFSA you only need to beat 4% returns to come out ahead. There are GIC's right now that guarantee more than that. Or you can roll the dice with investments and 4% is fairly reasonable to beat, or even most big oil companies like CNQ pay better dividends than that.

[max_boost]

smith move requires marth
be good at marth