RSP contribution vs. Mortgage lump sum
RSP contribution vs. Mortgage lump sum
A question that I’m asked quite a lot is whether it is preferable to contribute to an RSP, or pay down the mortgage.
The general rule of thumb is that as the mortgage interest increases, or as the investment time horizon decreases, it becomes more attractive to prepay the mortgage.There are normally 3 options that people see as alternatives:
Paying off your mortgage first, and then contribute to an RSP - as under typical circumstances the interest that you are paying on your mortgage is with ‘after-tax’ dollars;
Contributing to your RSP and using the tax savings to pay a lump sum on your mortgage; and
Contributing to your RSP and use the tax savings to make a further contribute to your RSP.
Everyone’s circumstance is different, so it is best to speak to your financial advisor about the choice that is best for you and then whichever you and your advisor select, we at Harlow Financial are here to help you implement your strategy.
Thank you for spending your time with me. I’m Siobhan Harlow and I’m here to help.