Pay down the mortgage? Or build up your RRSP?

16 January 2015
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Morningstar, Vikram Barhat

How to decide? Cynthia Kett, a principal with the advice-only firm Stewart & Kett Financial Advisors Inc. in Toronto, suggests considering your mortgage rate on a pre-tax basis.

“If you’re in a 50% marginal tax bracket, your pre-tax mortgage rate would be double your stated rate,” she says. “A 2.5% mortgage rate would be equivalent to 5% on a pre-tax basis. By paying down your mortgage, you’re earning a guaranteed rate of return equal to the pre-tax mortgage rate. Where else could you get the same risk-free rate of return?”

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About Stewart & Kett


Stewart & Kett Financial Advisors Inc.
911- 123 Front Street West,
Toronto, Ontario,
M5J 2M2, Canada
(Adjacent to Union Station)
Phone: (416) 362-6322
Fax: (416) 362-6302