One of the most common financial questions Canadians ask is: Should I pay down my mortgage faster, or should I invest my extra money? It’s a smart question and an important one because the decision can have a long-term impact on your wealth, cash flow, and peace of mind. The truth is, there is no one-size-fits-all answer. The right choice depends on your financial goals, interest rates, risk tolerance, tax situation, and stage of life. In many cases, the best strategy isn’t choosing one over the other it’s finding the right balance between both. We’ll break down the key factors to consider so you can make a confident, informed decision.
Before comparing strategies, it’s helpful to understand what each option really means.
Paying extra toward your mortgage through lump-sum payments, increased payment frequency, or higher regular payments—reduces your principal balance faster. This can:
For many homeowners, this option feels safe and emotionally rewarding.
Investing instead of accelerating mortgage payments means putting extra money into vehicles such as:
Investing gives your money the potential to grow over time, often at a higher rate than your mortgage interest—though with market risk.
A key difference between paying down a mortgage and investing is certainty.
When you pay down your mortgage, your return is guaranteed. If your mortgage rate is 5%, paying it down is equivalent to earning a risk-free 5% return.
There is no market volatility, no uncertainty, and no downside—
just steady progress toward debt freedom.
Investments, on the other hand, offer potential returns. Over the long term, diversified portfolios have historically delivered returns higher than most mortgage rates but those returns are not guaranteed and can fluctuate year to year.
The key question becomes:
Are you comfortable accepting risk in exchange for potential growth?
Interest rates play a major role in this decision.
When mortgage rates rise, the benefit of paying down debt becomes more attractive. A higher interest rate increases the guaranteed return of extra mortgage payments and reduces the advantage of investing.
In higher-rate environments, many homeowners choose to prioritize mortgage reduction, especially if investment returns may not significantly outpace borrowing costs.
When mortgage rates are relatively low, investing may have a stronger case particularly for long-term investors. If your expected investment return exceeds your mortgage rate, investing can build greater net worth over time.
That said, market volatility and personal comfort with risk still matter.
Taxes can significantly influence which option makes more sense.
For most Canadians, mortgage interest on a primary residence is not tax-deductible. This means any interest you save by paying down your mortgage is an after-tax benefit.
Investing through registered accounts can offer major tax advantages:
If you have unused RRSP or TFSA contribution room, investing may offer additional benefits beyond simple returns.
Another key difference is access to your money.
Once money goes into your mortgage, it’s no longer easily accessible unless you refinance or use a home equity line of credit (HELOC). While this can encourage disciplined saving, it may reduce flexibility.
Money invested—especially in a TFSA or non-registered account—can often be accessed more easily for emergencies, opportunities, or life changes.
Maintaining liquidity can be important for families, business owners, and anyone with variable income.
Financial planning isn’t purely about numbers—it’s also about how you feel.
Many homeowners place high value on:
For some, eliminating debt is worth more than potentially higher returns elsewhere.
Investing requires the ability to stay the course during market ups and downs. If market volatility causes stress or leads to emotional decision-making, investing may feel less comfortable—even if the math suggests it could be beneficial.
There is no wrong choice if it aligns with your values and keeps you on track.
Where you are in life often determines which strategy makes more sense.
You may benefit from investing early to take advantage of long-term compound growth—especially if retirement is decades away.
Many people choose a blended approach: contributing regularly to investments while making modest extra mortgage payments.
Reducing or eliminating mortgage debt before retirement can lower fixed expenses and reduce financial stress when income becomes more predictable.
For many Canadians, the best solution isn’t choosing one option—it’s combining both.
A balanced approach might include:
This approach provides growth potential while steadily reducing debt.
Before deciding, consider these questions:
Your answers help clarify which path—or combination—fits your situation.
The decision to pay down a mortgage or invest is rarely static. It changes as markets, interest rates, and your personal circumstances evolve.
A financial advisor can help you:
At Dunbrook Associates, we help clients evaluate both sides of the equation and create personalized strategies that support long-term financial confidence.
Paying down your mortgage and investing are both smart financial moves—the key is understanding whenand how much to do of each.
Whether your priority is becoming debt-free, growing wealth, or balancing both, the right strategy is one that fits your life, your goals, and your peace of mind.
If you’re unsure which path is right for you, a thoughtful conversation with a financial advisor can bring clarity and confidence to your decision.
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