Is Now the Time to Pay Down a Mortgage, or Invest Long-Term?

For those with the ability to stash some extra cash away from each and every paycheck, the question of whether repaying debt or investing in the stock market or other securities for the long-term is one which many are having to battle with.

The realities is that approximately two thirds of the debt Canadians carry is, on average, mortgage-related. Having a big mortgage has become a way of life for most, and with interest rates still near historical lows, it may make sense for many to continue making the minimum possible payment and invest money in the stock market with the expectation of earning a return much higher than the interest rate one will pay on a typical five-year fixed mortgage.

That being said, interest rates are on the rise, and with higher leverage comes higher risk relating to household ability to manage debt payments in different economic scenarios.

While the most recent recession a decade ago did not impact the average Canadian household in a significant fashion, this time around things may be different. For those with debt loads which are 300% or higher of one’s average annual income (which also comprise a significant percentage of overall national debt), de-levering at this point in time may be considered prudent. As has been said many times, preparing a ship for some turbulence when the waters are calm rather than when the storm is on the horizon, is typically a much better strategy.

Invest wisely, my friends.