Should I Invest or Pay off my Debt?

People often wonder – should I pay off my mortgage or invest with my savings. With borrowing rates extremely low right now, its possible to either pay down a mortgage or invest and potentially get a better return.

For example, if you could choose between an investment that earned 7.5% or a mortgage that charged 1.75% as a fixed rate, which would be the better place to put your money? If you could fix that rate at 1.75% for 5 years, you could then use your investments to earn a sizable profit over time – providing the investment continued to yield 7.5% and didn’t change in value.

Here’s an example below which uses $500,000. You could either use that amount to pay off your mortgage or use it to invest.

Mortgage $500,000 at 1.75% Interest = $8,750 Savings in interest

Invest $500,000 at 7.5% Yield = $37,500 Returns

The Difference = $28,750

$28,750 could be the difference if you decide to invest instead of paying off your mortgage.

If this is something that interests you, get in touch with us to discuss your options. Keep in mind interest and dividends are taxable in the year that they are earned and investments and investment returns are not guaranteed so using caution is always advised. Please note that the investment return mentioned here is hypothetical and will vary depending on the type of investment chosen.

Noah Belcher is an Investment Advisor with iA Private Wealth Inc., and is a CERTIFIED FINANCIAL PLANNER® professional and a Chartered Investment Manager (CIM®), who helps his clients achieve their financial goals and objectives. He offers personalized solutions and stellar customer service to clients with complex tax profiles who require top-notch advice.

If you have any questions about this article or would like to talk to him about your financial profile, call his office at  (604) 535-3454.

This information has been prepared by Noah Belcher who is an Investment Advisor for iA Private Wealth. Opinions expressed in this article are those of the Investment Advisor only and do not necessarily reflect those of iA Private Wealth Inc. iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.

 The information contained herein may not apply to all types of investors.  iA private Wealth Inc., is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.