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RRSP or Mortgage Pay-Down?

The RRSP Question

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At this time every year the perennial question arises, pay down the mortgage or top up the RRSP? 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 advise but there are those who say, “mortgage first”.

They argue 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 RSP contribution room is always available, it never expires. You can use it whenever you have the money.

Either way though – mortgage or RRSP – they say doing one or the other is better than doing nothing.