This is one of the most common questions from our clients who have extra cash. Should I invest the extra cash now, or should I pay down my mortgage, and then invest for the future? The simplest way to look at the effects of both scenarios is to consider the cost of borrowing, and the return on investment.
If the return on your investment yields a higher return than the cost of borrowing on your mortgage, investing the cash now will put you further ahead in the long run. With Canadian interest rates for mortgage financing quite low, look for investments that can yield a higher return, and invest your capital there. To take this one step further, consider leveraging your cash into investments or even using borrowed funds from low interest mortgages to invest.
This is only a general rule of thumb to consider when determining what to do with extra capital that you have, the normal risks and evaluations of any investment decision need to be considered.
