At this time every year a recurring question arises – should you pay down the mortgage or top up the RRSP? Over the years, experts have disagreed on which course to take for financial well being. Traditionally the answer has been – top up the retirement savings and use the tax refund to make an extra mortgage payment. It is not bad advice, but there are those who say – “mortgage first”.
The argument is that paying off your mortgage will give you much more financial freedom. No mortgage payments means more money in the bank and if you need to borrow you can use a home equity line of credit with a preferred interest rate. They also point out that price appreciation on your home is a permanent, tax free capital gain. RRSP contributions are just a tax deferral. Further, they say, any unused RRSP contribution room is always available, it never expires. You can use it whenever you have the money.
Either way though – mortgage or RRSP, doing one or the other is better than doing nothing! Reminder – Deadline to take advantage of RRSP contributions for 2013 is March 3rd, 2014.
For a few minutes of your time, I can provide you with unbiased assistance at no cost and no obligation to help you determine which direction can help you towards your financial well-being!