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Paying Down Your Mortgage vs. Investing: Making the Right Financial Choice


One of the most common questions we get asked is whether to pay down the mortgage or invest those funds. On one hand, reducing your mortgage balance can bring peace of mind and financial security, while on the other hand, investing offers the potential for higher returns and wealth accumulation. Let’s dive into the pros and cons of each approach, and hopefully help you make a decision that aligns with your goals and dreams.

Benefits of Paying Down Your Mortgage:

• A Mortgage can be a stress contributor for a lot of people, especially because mortgage balances are usually higher than other debts. Owning your home outright is something that a lot of Canadians dream about. Putting a lump sum against your mortgage can provide immediate, and short-term satisfaction that is hard to get with investing those funds.

• Paying down your mortgage can reduce your monthly payments, which in turn can free up some cash flow to be redirected towards other goals or emergencies.

• As those low-interest rate terms come close to their renewal dates, you could potentially reduce your interest payments by putting lump sums towards your mortgage balance.

Benefits of Investing Those Extra Funds:

• When you pay down your mortgage, you are technically investing in your home, which is a real estate asset. There is no chance to diversify those extra funds by taking that approach. On the other hand, by putting those funds to work through your investment accounts, you could. diversify into almost anything.

For example, imagine you have an extra $50,000 you are considering to either pay down your mortgage with or put towards your investments. By paying down your mortgage, you are essentially investing in a real estate asset. By putting towards your investment accounts, you could buy Equities, Fixed Income, alternative investments, or even a diversified portfolio of real estate assets.

• When you invest for the long-term, compounded growth can make a massive difference in your net worth. The power of compounding gets very evident if you take a penny and double it every. day for 30 days. As fascinating as it sounds, you end up with just over $5.3 million. When you put money towards your mortgage, there is an amount you save in interest and that’s the maximum you can increase your net worth by. By investing those funds, you allow your net worth to compound over the long term.

Finally, if you compare your mortgage interest rate to what a well-diversified portfolio could potentially generate, a well-managed portfolio has historically generated higher returns. The way I like to see it, there is a psychological answer and a math answer to this age-long debate. The math answer could tell you to invest and show you that it’ll work better. But, if that doesn’t help you sleep well at night, it’s not worth taking that approach. After all, the whole purpose of an investment advisor is to help you find the freedom that your finances can provide for you. If you are debating on what’s the right answer for you, Click here to schedule a free consultation.

- Jai Gandhi, Associate Investment Advisor Jai Gandhi is an Associate Investment Advisor at Endeavour Wealth Management with iA Private Wealth, an award-winning office as recognized by the Carson Group. Endeavour Wealth Management provides comprehensive wealth management planning for businessowners, professionals and individual families. This information has been prepared by Jai Gandhi who is an Associate Investment Advisor for iA Private Wealth and does not necessarily reflect the opinion of iA Private Wealth. The information contained int his newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained here in may not apply to all types of investors. The Investment Advisor can open accounts only in the provinces in which they are registered. 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.


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