Mortgage Repayment v.s. RRSP

[BobtheBuilder]

Hi All,

A quick question, should I pay back some of my mortgage first, or should I buy some tax-sheltered RRSP. Here are some figures,

current mortgage rate is variable @3.65, looks like it will go up to 4.5% by end of 2005.

One no-risk RRSP product will be registered GIC paying 3% annually. My current tax bracket is around 25%.

Now, who has any bright ideas? Thanks a million.

Bob

 

[oread]

You should talk to a financial advisor to set up a personalized investment plan for you and your family.

What to invest depends on a few factors:
-your investment goal: to retire, for your kids education, to have a around-the-world trip in 5 years, etc.
-your risk tolerance: conservative or can take a little bit of risk
-liquidity: how urgent do you need the money, in 1 year, 5 years, or at time of retirement
-your investment knowledge: are you a financial guru or the term ROI or MER is like alien language to you (this is where I am )

p.s. On a personal note, GIC is never my favorite.

 

[挺傻]

支持渐渐的说法。这个可不是QUICK QUESTION，最好去银行找你的客户经理跟他们谈或者让他们给你推荐到financial advisor那里谈，他们的建议应该比较专业，顺便作个长期计划也挺好。

 

[BobtheBuilder]

Appreciate your reponse

Thanks to 挺傻 and 渐渐.

It's never a QUICK QUESTION as long as it involves money.

I was thinking more in the time span of a year or two, not really long-range planning. Nothing really in detail, just want to find out the option that majority Chinese people take in terms of paying off their mortgage or buying RRSP.

From my mention of GIC, you probably guesses about my risk tolerance level. I am open to any advice though and appreciate your response.

Over to you.

 

[oread]

I don't know if there is an investment option that the "majority of Chinese" prefers.
Given my limited investment knowledge, I do the obvious things: invest to the maximum allowable amount in RRSP every year. The rest, if there is any, put into mortgage, mutual funds and stocks (through employee shared purchase plan).

 

[seeing]

I tell you one thing. One banker told me I should buy RRSP even though I need to get a loan to buy RRSP. From this point of view, you should buy RRSP instead of paying off mortgage.

 

[lazy susan]

最初由 seeing 发布
I tell you one thing. One banker told me I should buy RRSP even though I need to get a loan to buy RRSP. From this point of view, you should buy RRSP instead of paying off mortgage.

Correct me if I am wrong. The interest charged on the loan you borrow to buy RRSP is tax deductable, right? But the interet you pay for your mortgage is not.

 

[seeing]

only the RRSP is tax deductable. not the interest.

 

[笑傲江湖]

That is true only if you are in the high-tax bracket.

最初由 seeing 发布
I tell you one thing. One banker told me I should buy RRSP even though I need to get a loan to buy RRSP. From this point of view, you should buy RRSP instead of paying off mortgage.

 

[BobtheBuilder]

Agree, you are right.

最初由 seeing 发布
only the RRSP is tax deductable. not the interest.

Read the relevant document on RRSP at CRA's website.

 

[小傻]

最初由 挺傻 发布
支持渐渐的说法。这个可不是QUICK QUESTION，最好去银行找你的客户经理跟他们谈或者让他们给你推荐到financial advisor那里谈，他们的建议应该比较专业，顺便作个长期计划也挺好。

挺傻 MM, someone argues, trying to pay back the mortgage(say, bi-weekly double payment, lump sum) as quick as possible is not a good idea (or in other words, stupid) since the mortgage rate maybe the lowest rate you can borrow in your whole life...what's your opinion on this? :blink:

 

[hookedonfishing]

"mortgage rate maybe the lowest rate ", 但它记的是复利,所以算下来比别的还高

 

[笑傲江湖]

Right, but... nobody (I mean most Chinese) likes to carry a debt.. If you can, why not pay it down or pay it off?

最初由 小傻 发布

挺傻 MM, someone argues, trying to pay back the mortgage(say, bi-weekly double payment, lump sum) as quick as possible is not a good idea (or in other words, stupid) since the mortgage rate maybe the lowest rate you can borrow in your whole life...what's your opinion on this? :blink:

 

[挺傻]

最初由 小傻 发布
挺傻 MM, someone argues, trying to pay back the mortgage(say, bi-weekly double payment, lump sum) as quick as possible is not a good idea (or in other words, stupid) since the mortgage rate maybe the lowest rate you can borrow in your whole life...what's your opinion on this? :blink:

其实一旦你拥有了一个房子，只要这个房子已经不是高ratio的贷款状态（小于75％贷款）你就可以去银行以房子作为抵押贷款，那样下来贷款的利率和MORTGAGE的利率是没什么分别的。（有些条件的限制，但是那些细节的问题基本不会影响最终的结果，只是不同情况需要采取的操作手段不同）即使你申请的是line of credit,如果你以房子作为抵押，在scotia能够获得的最低利率也是prime -0.75和最低的MORTGAGE利率完全一样。
要是哪位想要知道具体细节，可以详谈
我支持在量力而为的情况下，尽快付清mortgage。因为timing market不是一件容易的事情。有的时候吃力不讨好，费了半天劲头税后收益和付MORTGAGE的费用差不多。
但我不支持完全为了付清就什么都不干，我支持购买RRSP，因为RRSP在减税的情况下获得长期投资的收益回报相对稳定。比如ultimate GIG可以有3.75回报如果是stock indexed 就可以更高。还有那些mutual fund, 回报应该更高。这些回报也是免税的，相对就比较值了。

 

[shusheng]

最初由 挺傻 发布

其实一旦你拥有了一个房子，只要这个房子已经不是高ratio的贷款状态（小于75％贷款）你就可以去银行以房子作为抵押贷款，那样下来贷款的利率和MORTGAGE的利率是没什么分别的。（有些条件的限制，但是那些细节的问题基本不会影响最终的结果，只是不同情况需要采取的操作手段不同）即使你申请的是line of credit,如果你以房子作为抵押，在scotia能够获得的最低利率也是prime -0.75和最低的MORTGAGE利率完全一样。
要是哪位想要知道具体细节，可以详谈

Ft，你哪个branch的，我要去详谈详谈。