I got a letter in the mail today from my mortgage company. As expected, my mortgage payments are increasing due to the raising of the prime interest rate at the Bank of Canada. I have a variable rate mortgage which has served me well for many years, saving me thousands.
It used to be that it made more sense to park my money in a savings account than pay off my mortgage in extra payments. This was because the interest rate in my savings accounts would be higher than the interest rate on my mortgage. This hasn’t been true for a while and now with my mortgage costing me more, I’m leaning towards paying down my mortgage faster with extra payments again. This will save me more money in the long run.
Of course, if I had say $10,000 to pay down my mortgage or I could invest that into a mutual fund with a 10% annual return, I’d be crazy not to invest. There are no guarantees with investments though and the markets have been acting wildly lately. As with most things though, diversifying my money is the safest choice. Perhaps taking $5,000 to pay down my mortgage and taking $5,000 to invest would cover all my bases.
I wonder how high the interest rates will go?