Invest or pay off debt: A comprehensive guide for Canadians + MORE Jan 17th

Your net worth is calculated by taking your assets and subtracting your liabilities. Both investing and repaying debt can boost your net worth as a result. The question is: which is better? In our guide about paying off debt versus investing, we cover the options from a number of different perspectives so you can decide what is best for you.

Should you accelerate your mortgage payments or invest?

Making the right choice boils down to prioritizing and projecting. But here’s the thing: mortgage debt repayment is investing. Your return comes from interest savings that accrue by paying down the principal portion of your debt.

Sometimes, Canadians choose to invest in other assets instead of paying down debt. If you think you can earn a higher rate of return on your investments than the interest rate you’re going to pay on your debt, in theory, you might be better off investing. In practice, though, it depends.

There are practical considerations to help determine which investments are better than paying down your mortgage faster…

A regular review of the latest mortgage and real estate news, a recap of key headlines, and a preview of upcoming economic releases.

When it comes to predicting mortgage rates, the only thing Canada’s mortgage experts are certain of right now is that nothing is certain.

Canada Mortgage and Housing Corp. says the total number of housing starts in 2024 rose two per cent compared with 2023, helped by increased starts in Alberta, Quebec and the Atlantic provinces.

Ask MoneySense
Is it a good idea to pay off my mortgage with my RRSP money and then put what my mortgage payment was back into the RRSP once I’ve paid it off? What are the pros and cons of this strategy to being mortgage free?

–Mike

Pay off a mortgage or keep investing with RRSPs?

Paying off your mortgage with your registered retirement savings plan (RRSP) and then putting what your mortgage amounts would have been back into the RRSP may not be a good strategy for several reasons.

If you withdraw any money from your RRSP, it is taxed as income. There is withholding tax on the withdrawal initially, but the total tax depends on your other sources of income for the year when you file your tax return.

If you withdraw from an RRSP, you do not recapture that initial RRSP contribution room and you may not be able to re-contribute the same amount back to the RRSP unless you have sufficient current room. This means you will forgo years of compounded returns on the money you have withdrawn, and it can never be made up…