No one likes having a mortgage payment and it seems many people are in a hurry to pay it off as soon as possible, but is this really the best strategy for a healthy retirement?
What many people don’t realize is that they could be putting the money they are using to pay down their mortgage, to work for them in other investments right now. If you wait until your mortgage is paid off, and then start investing you miss out on years of investment returns. And these other investments could give you a much higher return on investment. Let’s look at a few other options.
RRSP’s
By purchasing RRSP’s you’ll decrease the tax you pay every year and get a refund. If you’re completely set on paying off your mortgage you could use that refund to do so.
HELOC
The long name for that is a home equity line of credit and this is a great source of capital for other investments, such as purchasing a rental property. Or perhaps you know of another great investment that needs some capital to get it going. A HELOC gives you access to the equity you’ve already built up in your home, whenever you need it.
The Smith Manoeuvre
The smith manoeuvre is a short term high return investment combined a long term investment, usually using a form of credit, such as the HELOC. The whole idea is the short term high return investment performs well enough to pay off the line of credit and then you’re left with a long term investment and no more credit payments. Now that’s putting your money to work!
The Smith Manoeurve is very high risk and something I don’t advise my clients to explore but it is an option.
With the increase in the life expectancy, the equity in your home isn’t likely to be enough for you to live out the rest of your days comfortably. Either way you go with investing, it’s important to diversify. By focusing solely on paying down a mortgage you’ll be missing out on other investment opportunities.
Contact me today for more information.
