Help with investing funds or paying some of mortgage off

[Slotback]

A loan (say, $40K) has been repaid by a friend and I am in the midst of deciding where to allocate those funds. I'm not a investor as I'm not familiar with the markets and thus my risk-tolerance is very low. Now I do have a mortgage ($300K) which will be renewed 1 year from now, but am wondering whether its advisable to invest say in a GIC or is it more worthwhile to dump the 40K in the mortgage keeping in mind that the mortgage payments would not go down, but the principal will be less.

Any suggestions?

Thanks

[rfdrfd]

IMO, zero debt is always the goal.

I plan for the worse. Sure, you may get a good return on more investments with that extra $, but things do happen every day, ever hour somewhere in the city: Get hit by a car, slip and you break an ankle, leg, finger, hand, LAYOFFS (very common these years), all leading up to one thing:

Job loss = no income


So, owing less is always better.

[Slotback]

Now do my payments stay the same and the interest/priniciple amount just changes OR does my interest stay the same and my interest/principle amount stays the same as well?

Am I better serve using the money elsewhere?

[wesboag]

A loan (say, $40K) has been repaid by a friend and I am in the midst of deciding where to allocate those funds. I'm not a investor as I'm not familiar with the markets and thus my risk-tolerance is very low. Now I do have a mortgage ($300K) which will be renewed 1 year from now, but am wondering whether its advisable to invest say in a GIC or is it more worthwhile to dump the 40K in the mortgage keeping in mind that the mortgage payments would not go down, but the principal will be less.

Any suggestions?

Thanks

So you are saying you have $40,000 in cash? you have a $300,000 mortgage that is coming up for renew in 1 year. My suggestion as a financial planner may be different then some opinions on here, but never the less. You have not really provided much details about your financial situation so it would be difficult for anyone to actually make an informed suggestion regarding your particular situation. One must know your cash flow, your debts and other assets and liabilities before he/she would be able to tell you anything of substance. There are ways to have your money work for you whether it be through RRSP's, TFSA's or non-registered accounts and the particular asset allocation. What are your goals and concerns? How important is paying back your mortgage over other things like saving for retirement, setting up a college fund for your children? There are many questions that need to be addressed. How old are you, are you married?

Never the less, if your mortgage is coming up for renewal and your main goal is to plow that back into the mortgage but you have a year before you can do it and you want your investment to grow, a GIC may or may not be the way, but once again that would be difficult to suggest with less detail available. Do you have a TFSA? how about your spouse?

So many questions that need answers.

I know this wasn't a big help, so PM me and I can go into more details.

Cheers

Wes

[wesboag]

Now do my payments stay the same and the interest/priniciple amount just changes OR does my interest stay the same and my interest/principle amount stays the same as well?

Am I better serve using the money elsewhere?

If you are renewng your mortgage there is an opportunity to re-negotiate your payment structure, amortization, etc.

What are the terms of your mortgage and who is it with?

[slavka012]

OP, what is the interest in your mortgage? It it is variable it must really low right now. One year is kind of short for investing in stock. And GIC is unlikely to pay more than you mortgage interest.

[Slotback]

Its actually 5.49% in the 3rd year of a 4 year mortgage.

[Slotback]

Also, mortgage is with RBC

[PMREdmonton]

Keep enough money liquid as an emergency fund - 3 to 6 months of expenses.

Pour the rest into your mortgage.

Equities are over valued right now IMO - take the guaranteed return which is the equivalent of around 8% on your mortgage. Your payments will be less after the renewal.

[Slotback]

Would it be better off to pay in December or right now?

Do I keep that 40K in a regular savings account in the meantime?

[Shojin]

What's your marginal tax rate? Do you have a lot of unused RRSP contribution room? Have you contributed fully to your TFSA?

[Slotback]

no rrsp's
4k left to fill tfsa
50k income

[Shojin]

no rrsp's
4k left to fill tfsa
50k income

Top those suckers up first, put some into an emergency fund and throw the rest at the mortgage.

[sslinn]

$40K against your mortgage right now will save you $100K in interest. It is an easy choice for me.

[Germack]

Just pay down your mortgage as quickly as you can.