Should I Invest or Pay Down My Mortgage?
Should You Invest… or Just Kill the Mortgage?
Whether you’re shopping for a house or already paying one off, this question always comes up:
Do I put extra money into investing, or do I throw it at the mortgage and be done with it?
A few years ago, this was an easy call. Mortgage rates under 2% were basically free money. If your investments were earning high single-digit or even double-digit returns*, investing usually made more sense than rushing to pay off cheap debt.
Fast forward to today. Rates are double or even triple what they used to be. Renewals are painful. Monthly payments are higher. And suddenly this decision isn’t so obvious.
There’s no perfect answer. But there is a smart way to think through it.
Here are four questions that actually matter.
1. Do You Have Extra Money Left Over Each Month?
This is the big one.
Before talking about investing, taxes, or strategy, ask a simple question:
Do I actually have extra cash once my bills are paid?
Mortgage payments have jumped.
On a $350,000 mortgage amortized over 25 years—the current average loan size in Canada*—the numbers look very different today. At an interest rate under 2%, payments were around $1,450 per month. At roughly 5%, that same mortgage is close to $2,000 per month*.
That’s an extra $500 every month just to keep the same house.
When that much money is being redirected to the mortgage, it’s harder to invest or aggressively pay down debt. Everything starts with cash flow. If there’s no surplus, there’s no strategy.
2. How Do You Handle Risk… Really?
This is where people think they know themselves, but often don’t.
If you’re comfortable with ups and downs, investing may still make sense over the long run. Over the past decade, Canadian markets have averaged just over 8% annually*, while U.S. markets have averaged closer to 13% per year*.
Even with higher mortgage rates, those long-term returns suggest investing could come out ahead.
But markets don’t move in straight lines.
In 2022, Canadian stocks dropped nearly 10% and U.S. stocks fell more than 20%. If watching your investments fall like that makes you anxious, stressed, or tempted to pull money out at the worst time, paying down your mortgage may be the better option.
Paying off debt isn’t exciting. But it’s guaranteed. And for many people, that certainty is worth more than chasing higher returns.
3. What Do Taxes Do to the Math?
This part often gets overlooked.
Mortgage payments are made with after-tax money—what’s left after the government takes its share. That means investments need to earn more than just your mortgage rate to truly “win,” especially if they’re held in taxable accounts.
Depending on your tax bracket and the type of account you use, you may need to earn significantly more on your investments just to break even compared to paying down the mortgage.
Registered accounts can change the equation.
With a TFSA, the comparison is fairly clean since growth isn’t taxed. With an RRSP, there’s an extra advantage: the tax refund.
For example, if you invest $20,000 into an RRSP and receive a $10,000 tax refund, that refund can go straight toward your mortgage. You’re investing for the future while also reducing debt today.
That’s not an all-or-nothing choice. It’s both.
4. What Are You Actually Trying to Accomplish?
Numbers matter, but they aren’t everything.
Some people just want the mortgage gone. Others are comfortable carrying debt if it allows them to invest, build wealth, or keep flexibility.
Neither approach is wrong.
Ask yourself:
Do I hate debt?
Do I value certainty over potential upside?
Am I focused on retirement, cash flow, or peace of mind?
It’s also worth remembering that your home itself is an investment*. Every payment you make increases the portion you own and reduces what the bank owns.
And once the mortgage is paid off, that same monthly payment can be redirected into investments. No lifestyle change required.
The Bottom Line
This isn’t an either-or decision.
You can invest and pay down your mortgage at the same time. You can adjust as rates change. You can shift strategies as your income, goals, and comfort level evolve.
The right answer is the one that fits your cash flow, risk tolerance, tax situation, and long-term goals—not what worked for your parents or your neighbour.
Clarity beats dogma every time.
Sources
S&P Global, “S&P/TSX Composite Index”, 2025
Canada Mortgage and Housing Corporation, “Average Value of New Mortgage Loans: Canada, Provinces and CMAs”, October 2025
Calculated using RBC’s Mortgage Calculator
S&P Global, “S&P/TSX Composite Index”, 2025
S&P Global, “S&P 500”, 2025
