Invest .... in your mortgage?

It's a risk-free investment for guaranteed savings.

You're already paying interest on your mortgage. So in light of higher rates and market volatility risks, putting money down now may be a fool-proof way to help you come out ahead.

Nov 15, 2022

Dan Eisner, True North Mortgage Founder & CEO

Life's giving us higher rates — make it work for you.

If you hold a variable rate mortgage or have renewed at a higher fixed rate, your interest rate is (way) up. For some, that means your mortgage interest costs have at least doubled over the last year.

Here's a way to make the most of higher interest. You've heard the saying "when life gives you lemons, make lemonade." With rates going up fast, you can make the most of it by reducing your costs, saving more and making some budget room — by putting more down on your mortgage principal if you have extra funds. It's an investment worth your while during a time of rate and economic volatility.

Markets are in turmoil. Investing in your mortgage is a sure thing.

Interest rates were low for quite a while, and if people had money to invest, there were usually more-attractive options out there rather than plunking it down on your mortgage principal.

But now, rates are much higher than we've seen in a while, and economic volatility makes investment options that much riskier.

Should you roll the dice with market investment? Or put it towards paying down your mortgage?

Let's say you're a homeowner (with a mortgage) who has some extra cash put aside. You have to ask the question: "It is better to pay down my mortgage that's costing me, say, 5.0% (or whatever the current rate is right now), or use the money to invest elsewhere, like in the stock market, in TFSAs, GICs...?" You get the idea.

Here's the thing to consider: When you put extra down on your mortgage principal, it's 'after tax' and risk-free.

For that equivalent through an investment platform, you'd have to find something that:

Is near risk-free; and
Generates around 6.5% in interest so that after tax, the real return brings at least 5.0% (enough to offset your mortgage interest costs).

That almost risk-free 6.5% investment may be a lot harder to find right now compared to your mortgage, which is closer at hand.

Investing in your mortgage provides many possible savings benefits:

Buffer against further rate increases by lowering your principal now to reduce your interest costs.
Compound your interest savings over the length of your mortgage loan.
Reduce your amortization to pay off your mortgage earlier (saving hundreds or thousands on interest that you would have otherwise paid).
Build home equity faster.
Access to better rates or options at renewal time.

Do have a fixed-payment, variable-rate mortgage with a big bank? It's wise to be paying down extra money now on your VRM product to avoid a higher amortization and bigger interest-cost hit at renewal (THINK Financial, our in-house lender, only does ARM mortgages with payments that float).

Squeeze extra cash down now, enjoy the savings later.

If you're getting whiplash from all the recent market ups and downs — now's a great time to make a safer (mortgage) investment.

The savings you get on interest costs may outperform other interest-based options when considering current market volatility and risk assessment.

Plus, having the option of lowering your payments later can free up more budget room to spend on other things. It all adds up to a win-win investment scenario for our clients.

Want even more ways to save? Our expert brokers have other strategies and options and can offer great, unbiased advice depending on your situation.

Or, we can help you start off with a better rate and mortgage in the first place. That's our job, which we love.

Talk to us. Save your money.

Compare Rates and Save

Higher Rate

Lower Rate

Mortgage Size

Mortgage term

Amortization Remaining

Save over 5 years:

$5,464

A lower rate gives you more savings than merely a lower monthly payment. The real savings is both the interest saved, plus the additional principal paid down over the term.

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breakdown

The difference in monthly payments would be 41, but the value is substantially more.

4.44%

4.24%

Savings

Total monthly payments

Principal paid over term

Various tools and functions of this website perform calculations and provide cost estimates. These tools are designed for illustrative purposes only and make many assumptions that may not reflect all situations. Please use these tools in collaboration with a True North Mortgage agent. True North Mortgage does not guarantee the accuracy, reliability or completeness of these tools or calculations.