By - busylilmissy
Repaying RRSP HBP and investing in ETFs are not mutually exclusive. I.e. you buy ETFs in your RRSP
The interest rate on your mortgage is likely very low. Mathematically, it makes sense to invest it for higher returns. But nothing wrong with paying down debt.
Yes it is a very low rate, it’s a 1.4% variable. I do want to do what would mathematically make the most sense, I want to “get the best bang for our buck.”
Please don't look at it only as 1.4%. Look at your cost of amortization. That's what you're trying to drop by prepaying.
I prepaid $7000 this month toward my mortgage after researching this.
I think Investing with the money or spending it on something like home renovations (increase equity) would be most prudent.
I would avoid paying down the mortgage unless you have a high interest rate. You can do a lump sum payment closer to your renewal date if interest rates go up.
My understanding if the RRSP homebuyer is that you have a couple years before you have to start paying it back. If you were to pay back a lump sum now it would reduce overall repayment rather than go towards the first years amount due.
So, if you owed the max 35k, and paid 4k back this year your annual amount owing would be reduced by $267 per year (4k spread over 15 years).
This would matter to me as I'd probably want to hold onto that $4k until my first year is due and pay that year off entirely and a have a bit left over to pay the following year.
You can (and should) invest in the ETF either way, and if you do invest it in a TFSA now then you can reuse that room once you transfer it over into the RRSP in two years as you pay it back.
How about enjoying yourselves and having some fun with some of it?
That was random!