Help with investing funds or paying some of mortgage off

[Slotback]

but will the percentage of principal on the mortgage payment increase with the amount staying the same?

[Slotback]

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

What TFSA would you recommend? Flexibility on my mortgage is really important to me, and would rather allocate funds there then worrying about RRSP's later as I am still pretty young (mid 20's). As for an emergency fund, I do have a steady job and have quick access to some funds if need be.

[sslinn]

but will the percentage of principal on the mortgage payment increase with the amount staying the same?

Absolutely!! Check out the Canadian Mortgage Calculator at www.vertex42.com I guessed at some of your mortgage info, but you can put the correct info in there and see exactly what you can save and how the interest / principle ratio will change.

[slavka012]

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

Then pay the mortgage. If you absolutely want to invest, pay mortgage and take out a HELOC, then borrow and invest.

[Shojin]

What TFSA would you recommend? Flexibility on my mortgage is really important to me, and would rather allocate funds there then worrying about RRSP's later as I am still pretty young (mid 20's). As for an emergency fund, I do have a steady job and have quick access to some funds if need be.

You're never too young to start an RRSP! If you wait you will miss out on years of compounding returns. I suppose you would similarly save those years in compounding mortgage interest as well, but the premise is, in an RRSP your money grows tax-deferred at hopefully a higher return that your mortgage rate, and if you claim the contribution you will get a tax deduction, especially nice if you expect your income to grow quickly over the years.

At the very least top up your TFSA, that's a no-brainer. The simplest thing to do is to open a self-directed account at any of the banks and buy some index funds.

[dcaron9999]

My 2 cents would be to determine what your 3-6 month living expenses cost is, without having to fall back on any form of credit (CC, LOC, etc) or even borrowing from family.

Set above amount aside in an instant access, low-risk vehicile (HISA, TFSA, money market fund, etc).

Place some or most of your remaining monies on your highest interest debt, if you have any. (Your mortgage could be your only "debt").

Then decide how to split the rest between RRSP, mortgage, investment, and planned spending (toys, vacations , hobbies, upcoming "emotional" purchase, etc).

There are several articles on the net, and threads in this forum, that debate on which is better between mortgage pre-payments versus RRSP catch up.

Here's a couple of them ...
Smart investors skip RRSPs to pay down mortgage now:
http://www.aaron.ca/columns/2003-02-01.htm

Debate RRSP vs. Mortgage Million Dollar Journey:
http://www.milliondollarjourney.com/...s-mortgage.htm

Is an RRSP contribution better than a mortgage payment:
http://www.efficientmarket.ca/articl...NON_REGISTERED

Canadian Mortgage vs. RRSP calculator:
http://www.insurecan.com/rrsp/mod.php?mod=mortgageRRSP

[SkeptiKal12]

My 2 cents would be to determine what your 3-6 month living expenses cost is, without having to fall back on any form of credit (CC, LOC, etc) or even borrowing from family.

Set above amount aside in an instant access, low-risk vehicile (HISA, TFSA, money market fund, etc).

Place some or most of your remaining monies on your highest interest debt, if you have any. (Your mortgage could be your only "debt").

Then decide how to split the rest between RRSP, mortgage, investment, and planned spending (toys, vacations , hobbies, upcoming "emotional" purchase, etc).

There are several articles on the net, and threads in this forum, that debate on which is better between mortgage pre-payments versus RRSP catch up.

Here's a couple of them ...
Smart investors skip RRSPs to pay down mortgage now:
http://www.aaron.ca/columns/2003-02-01.htm

Debate RRSP vs. Mortgage Million Dollar Journey:
http://www.milliondollarjourney.com/...s-mortgage.htm

Is an RRSP contribution better than a mortgage payment:
http://www.efficientmarket.ca/articl...NON_REGISTERED

Canadian Mortgage vs. RRSP calculator:
http://www.insurecan.com/rrsp/mod.php?mod=mortgageRRSP

I am in a similar situation as the OP, although I have nothing to add to his question I wanted to say thanks for making this post. The links you provided are helpful.

[dcaron9999]

I am in a similar situation as the OP, although I have nothing to add to his question I wanted to say thanks for making this post. The links you provided are helpful.

You are quite welcome.

Im glad I can give something back to this board, which has educated me so much.

Feel free to leave positive feedback.

[Thalo]

I don't think anyone's mentioned this yet, but check with RBC, I'm pretty sure they allow you to prepay 10-15% of your mortgage without penalty each calendar year. If that's the case you can devote at least $30K of that money to the mortgage right away and then the rest on January 2nd. That interest rate is relatively high by today's standards; you will not find any low risk investments that pay anything near that much after tax.

[Slotback]

I don't think anyone's mentioned this yet, but check with RBC, I'm pretty sure they allow you to prepay 10-15% of your mortgage without penalty each calendar year. If that's the case you can devote at least $30K of that money to the mortgage right away and then the rest on January 2nd. That interest rate is relatively high by today's standards; you will not find any low risk investments that pay anything near that much after tax.

I contacted RBC and they told me that I could pay up to 10% per year, so that would be 30k this year, and then the remainder on January 2nd. However, is it better to hold off on the entire 40k and use that when the mortgage is renewed a year from now when my renewal is up?

[GSRee]

I contacted RBC and they told me that I could pay up to 10% per year, so that would be 30k this year, and then the remainder on January 2nd. However, is it better to hold off on the entire 40k and use that when the mortgage is renewed a year from now when my renewal is up?

If you put the money down right away, then you start saving interest right away. I can't think of a similar benefit that would be gained by holding onto the money until renewal time.