From 1 to 10, how stupid an idea it is to pay mortgage faster?

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Apr 26th, 2022 1:32 am

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Mar 14th, 2022 2:42 pm

WinterSleep [OP]: Deal Addict; Jan 26, 2016; 2232 posts; 2262 upvotes; Toronto, ON

Mar 14th, 2022 2:42 pm

From 1 to 10, how stupid an idea it is to pay mortgage faster?

Say you are under 40 and that you decide to pay off your mortgage with a rate of fixed 2.29 percent for another 3 years.

Is investing the money the only good idea? What if one decides they want to live debt free?

78 replies

Mar 14th, 2022 3:00 pm

mb7057: Member; Jan 9, 2016; 200 posts; 162 upvotes; Oakville, ON

Mar 14th, 2022 3:00 pm

I second that. Its not stupid at all. Depends on the person and situation.

+4

Mar 14th, 2022 3:15 pm

favelle75: Deal Addict; Jan 3, 2013; 2699 posts; 1058 upvotes; Sidney

Mar 14th, 2022 3:15 pm

"Stupid" is a bit hyperbole......As others have said, you might not end up with the highest return, given how low interest rates are.....but paying off major debts is never bad per se....

+4

Mar 14th, 2022 3:16 pm

Gungnir: Deal Addict; Oct 21, 2014; 1790 posts; 2544 upvotes; Burlington, ON

Mar 14th, 2022 3:16 pm

It's not a bad idea. You can borrow against your house later if you need to.

The markets are going to be a casino for a while, the market's psychology is completely dominated by news so the plan is not a bad one.

+6

Mar 14th, 2022 3:17 pm

kimmelite: Deal Addict; Jul 24, 2019; 1145 posts; 1880 upvotes; Canada

Mar 14th, 2022 3:17 pm

We paid ours off early. Then continued to use the same monthly amount of mortgage payment into investments. We sleep well at night- no worries. No debt.

+14

Mar 14th, 2022 3:49 pm

cloak: Deal Addict; Sep 2, 2009; 2589 posts; 2582 upvotes; Ottawa

Mar 14th, 2022 3:49 pm

Not stupid.

Just like investing: there are many correct answers, some of them better than others for each individual.

(that does not negate that there are also incorrect ways, just that correct can be winning in a variety of ways: including paying off mortgage sooner)

+4

Mar 14th, 2022 5:18 pm

sushi604: Member; Feb 7, 2019; 319 posts; 235 upvotes

Mar 14th, 2022 5:18 pm

If it was for me I will do that! Knowing that I am debt free, I will sleep better at night and I wouldn’t trade it for any $$$. Ever since Covid I realize that it’s more important for me to focus in the present and for now I like the idea of no debt

+7

Mar 14th, 2022 5:36 pm

geoffs: Deal Addict; Aug 12, 2010; 1478 posts; 1681 upvotes; Earth

Mar 14th, 2022 5:36 pm

Look, been designated almost 20 years but the accounting groups changed our name to CPA...does that mean I can tell you what's right for you: NO! Nor can a CFA, CFP, etc, etc...recommend yes, but we would need to know your profile, because like the Jedi say: "only a Sith deals in Absolutes." Or the family approach: "The world don't move, To the beat of just one drum, What might be right for you, May not be right for some!"

Zoomer: 1 account for family and planning to leave for good in 2023
Koodo too: for a phone and locked to 24 months but was a good deal.

+1

Mar 14th, 2022 7:25 pm

GooseAkuma: Member; Jul 17, 2018; 305 posts; 159 upvotes

Mar 14th, 2022 7:25 pm

Not a stupid idea at all. With the market so frothy, one theory is that it's a better market for trading right now than investing. Most people don't regret living debt free.

+2

Mar 14th, 2022 7:33 pm

smartie: Deal Guru; Dec 5, 2006; 13838 posts; 9240 upvotes; Markham

Mar 14th, 2022 7:33 pm

I paid off mortgage first then started investment

In my case, having kid a bit late, don't want to leave debt to family just in case bad things happen. Never take anything for granted. Also don't have confidence in my investment skills, so rather paying debt first

It also depends on why you want to pay mortgage first. If you think stock market is down, so you want to pay debt, it might but also might not be a good idea since you could DCA to lower the stock cost, but if it's due to risk appetite, I don't see any issues

+2

Mar 14th, 2022 7:38 pm

JUnit: Deal Addict; Dec 28, 2007; 1181 posts; 773 upvotes

Mar 14th, 2022 7:38 pm

Who knows what mortgage rates will be in three years when it is time to renew? If they are much higher, you will be glad to have more of your mortgage paid down. If not, then at least you will have taken years off the amortization.

+7

Mar 14th, 2022 7:57 pm

will888: Deal Expert; Dec 12, 2009; 26135 posts; 16150 upvotes; Toronto

Mar 14th, 2022 7:57 pm

Always eliminate debt first before investing. I am just not comfortable with debt. It does not feel right owing money. I have enough financial capital already, so there is no point to take unnecessary risks.

~~Koodo $40/6GB~~
Public Mobile $40/15GB, $35/20GB, lot less with rewards
Tangerine Bank, EQ Bank, Simplii

+3

Mar 14th, 2022 8:25 pm

1xTiMeR: Deal Fanatic; Apr 25, 2006; 7967 posts; 3105 upvotes

Mar 14th, 2022 8:25 pm

Empty your mind. Be formless, shapeless, like water. You put water into a cup, it becomes the cup. You put water into a bottle, it becomes the bottle.

Split it.

50% into a dollar cost average account (index) / investments / 50% money paying off faster.

Diversifying your risks for maximum risk adjusted upside.

"If you make a mistake but then change your ways, it is like never having made a mistake at all" - Confucius

+5

Mar 14th, 2022 8:53 pm

performance: Member; Oct 31, 2006; 294 posts; 151 upvotes

Mar 14th, 2022 8:53 pm

Always eliminate credit card debt...mortgage not so much. being debt free is underrated...what you want is a careful balance of assets and liabilities.

+6

Mar 14th, 2022 9:24 pm

polk: Member; May 27, 2007; 257 posts; 76 upvotes; Vaughan

Mar 14th, 2022 9:24 pm

My wife and I spent a good part of the first 6 years of homeownership (2013-2019) paying down our mortgage. We made very few investments outside of paying down our mortgage. We felt great as the number was going down. At this point, we were probably just 1 year away from paying off the mortgage. I felt good until one fine day in 2019, we made the decision to upsize and ended up with a bigger mortgage.

Since 2019, I have been investing in the markets with fairly decent returns (tracking the market using index investing etc). I cannot stop thinking if I should have continued to invest between 2013-2019. I would have definitely come out ahead investing in the markets vs paying down my mortgage.

In hindsight, paying down the mortgage was not a good idea BUT I don't think I would have had the courage to liquidate a large investment portfolio and dump it into real estate to upsize.

No regrets in the end - you live and learn and do what makes you happy.

+1

Mar 14th, 2022 11:22 pm

randomthoughts: Sr. Member; May 5, 2006; 918 posts; 396 upvotes

Mar 14th, 2022 11:22 pm

I paid off my mortgage before investing. No regrets - safety has always been my goal. A bad economy could lead to job insecurity at the same times that markets crash - in that event, I'd like to be able to live on whatever crap job I can get. It didn't happen, but I don't mind planning for it anyway.

My goal has always been security, not wealth. Once I'm sure that I have enough money to be certain I can lead a simple life at around 30k/year (what I currently spend), I'll probably retire.

+5

Mar 14th, 2022 11:36 pm

SamInfinity: Deal Addict; Jan 5, 2006; 1049 posts; 248 upvotes; Mississauga

Mar 14th, 2022 11:36 pm

Why does it always have to be one or the other? I was always deeply invested until I got a house, and after that, I pared back my aggressive investment style to find a balance I was comfortable with. Now I make regular prepayments (I can make as many as I want throughout the year as long as it's below 20% total of my initial mortgage loan).

"If one's conviction is strong enough whether you're a bear or a bull, you should put your money where your mouth is. Otherwise, you don't have skin in the game, and you are nothing more than a cheerleader in the stands" - SamInfinity

+3

Mar 14th, 2022 11:55 pm

randomthoughts: Sr. Member; May 5, 2006; 918 posts; 396 upvotes

Mar 14th, 2022 11:55 pm

I actually didn't really know how to invest (or how i wanted to) while i was paying off my mortgage, so the last few years i was learning and found canadian couch potato.

+1

Mar 15th, 2022 7:50 am

rfd911: Member; Oct 6, 2017; 393 posts; 442 upvotes

Mar 15th, 2022 7:50 am

I pay off mortgage at a normal pace and instead like to invest for monthly passive income as much as possible. I want to have a 2nd source of monthly income beside my job which is why I invest into monthly high dividend ETFs/stocks. My goal is to at least get to a point where monthly passive income is enough to cover my ongoing monhtly expenses including mortgage. This gives me 'peace of mind'. Mortgage is the only debt I have and I don't mind carrying it. More equity in the house won't put food on my table in the short term if I lose my job.

+2

Mar 15th, 2022 9:08 am

WinterSleep [OP]: Deal Addict; Jan 26, 2016; 2232 posts; 2262 upvotes; Toronto, ON

Mar 15th, 2022 9:08 am

Thanks to all the posts. I was thinking it was dumb to put money int mortgage with low rates, but frankly the peace of mind has given me a lot of energy lately knowing I'll be debt free soon after selling my stocks. And good thing I did it before this downturn. Unfortunately some of my money is in RRSP I don't know how to get that out or what to do with it.

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