Personal Finance

10 K Cash - Should I pay towards mortgage or invest in ETF?

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Nov 16, 2013
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10 K Cash - Should I pay towards mortgage or invest in ETF?

I have 10 K cash and I am not sure if I should reduce my mortgage by paying this towards my home mortgage or invest it in ETF or E series ?
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Jan 16, 2011
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The NORTH
What is your mortgage interest rate vs what is the expected return on the ETF or E Series? Go with whichever is greater...
Jr. Member
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Nov 25, 2012
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ETOBICOKE
By reducing mortgage principle you are certainly saving the interest on mortgage. With ETF investment there is no guarantee that you will get returns. It also depends on the duration of your benefit analysis.
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Aug 4, 2007
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gonna echo on mortgage. no garentee on investment.
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x10a wrote: gonna echo on mortgage. no garentee on investment.
So by bonds with a greater yield than the interest on the mortgage.

Or buy dividned stocks that are paying out more than your mortgage interest rate. For example, 2.5% interest on a mortgage; Buy CM yielding 4.5%. Unless Canadian Imperial Bank of Commerce goes belly up you will continue to receive your dividends.

Example : $300,000 mortgage over 20 years with a 2.5% rate, a one time payment of $10k would save you $6,246.
$10k in CM stock today = 105 shares. Currently CM is paying $4.24 per share (payout has increased yearly for the last 5 years and CIBC has not missed a payout since 1868). If we keep the dividend the same for the next 20 years the payouts would be $8,904 or 43% more than the mortgage payout. I do not own CM nor do I suggest owning it, just using it as an example.
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Nov 16, 2013
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Thanks

I have 2.89% 3 year fixed mortgage for 400 K which will be up for renewal in 2016 .
Sr. Member
Nov 16, 2013
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Does it make a difference in credit rating by making additional Payment of mortgage?
Deal Addict
Dec 13, 2010
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kr0zet wrote: So by bonds with a greater yield than the interest on the mortgage.

Or buy dividned stocks that are paying out more than your mortgage interest rate. For example, 2.5% interest on a mortgage; Buy CM yielding 4.5%. Unless Canadian Imperial Bank of Commerce goes belly up you will continue to receive your dividends.

Example : $300,000 mortgage over 20 years with a 2.5% rate, a one time payment of $10k would save you $6,246.
$10k in CM stock today = 105 shares. Currently CM is paying $4.24 per share (payout has increased yearly for the last 5 years and CIBC has not missed a payout since 1868). If we keep the dividend the same for the next 20 years the payouts would be $8,904 or 43% more than the mortgage payout. I do not own CM nor do I suggest owning it, just using it as an example.
One thing missing from your examples are the taxes.
If you buy bonds, the eventual return is fully taxable.
For Canadian dividends the rate of tax is a lot less, however there is still tax.
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Jan 16, 2011
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vivmk20 wrote: Thanks

I have 2.89% 3 year fixed mortgage for 400 K which will be up for renewal in 2016 .
$400,000 @ 2.89% with a one time payment of $10k would net you a savings of $7,561 on a 20 year mortgage.
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thetipster wrote: One thing missing from your examples are the taxes.
If you buy bonds, the eventual return is fully taxable.
For Canadian dividends the rate of tax is a lot less, however there is still tax.
True, unless you purchased the investments in a TFSA.
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Jan 16, 2011
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vivmk20 wrote: Does it make a difference in credit rating by making additional Payment of mortgage?
I had set my payments to accelerated biweekly and increase the payment amount by 40%. Last time I talked to my banker I was told that paying down faster did not effect my refinancing or credit rating. BUT i am not a banker...
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Nov 9, 2003
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ETF until the end of 2016, then on to the mortgage when the economies post election slow down
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I say.. Drop it into your mtg. Say you have a 2.99% rate on your mtg.
Paying it down would mean you get a tax free 2.99% return on your money. Thats difficult to get in an investment unless you take a bit of risk.
You'd have to aim for about 4-5% in an investment to match the "return" of paying down your mtg. You'd have to take some moderate and possibly high risk investments to earn 4-5% (although it isnt too far fetch to earn 4-5% with moderate risk).
But dumping it into your mtg is risk free.
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Mar 13, 2012
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Planet Earth
Paying down debt was and is primary for us so my answer for you is dump in your mortgage. You have less principle on renewal and hopefully more to invest later for a longer period.
If at first you don't succeed, destroy all evidence that you even tried.
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Nov 16, 2013
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Thanks everyone.

Consensus seems to be on mortgage payment
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Oct 26, 2003
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UrbanPoet wrote: I say.. Drop it into your mtg. Say you have a 2.99% rate on your mtg.
Paying it down would mean you get a tax free 2.99% return on your money. Thats difficult to get in an investment unless you take a bit of risk.
You'd have to aim for about 4-5% in an investment to match the "return" of paying down your mtg. You'd have to take some moderate and possibly high risk investments to earn 4-5% (although it isnt too far fetch to earn 4-5% with moderate risk).
But dumping it into your mtg is risk free.
but the stock market average return is around 8% right, so that's hardly a wise decision
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May 11, 2014
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How about splitting it? What's wrong with putting half on the mortgage and investing half of it?

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