Should you pay off your mortgage faster or invest?
You have $729/mo extra. Where should it go? Compare three strategies with real Canadian tax brackets, compound interest, and RRSP refund reinvestment.
Mortgage → TFSA
Pay off in 14yr, then TFSA
Mortgage → RRSP
Pay off in 14yr, then RRSP
Pure TFSA
Invest from day 1, tax-free
Pure RRSP
Invest from day 1, refund loop
Your Total Net Worth (including home equity)
In all scenarios, you also own your home. At the end of 20 years, the mortgage is fully paid off and you have $350,000 in home equity. The values above show only what your extra $729/mo generated.
Key Insight
Pure RRSP ($610,428) wins when you invest from day 1 with the 30% refund loop. But Mortgage → RRSP ($360,078) is competitive because the freed $2,121/mo payment also gets the RRSP boost after payoff in year 14.
Total After-Tax Value Over Time
Includes TFSA/RRSP + taxable overflow (respecting contribution limits)
When does mortgage acceleration win?
If investment returns drop below ~5%, the guaranteed 4.0% savings from mortgage paydown starts becoming competitive. The mortgage is a risk-free return; the 8.0% is not guaranteed. Also: if your RRSP withdrawal tax rate equals your contribution rate, RRSP and TFSA produce roughly the same after-tax result.
Compound Interest (all scenarios)
Every month, your existing balance earns interest, then the new contribution is added:
Monthly rate: 8.0% / 12 = 0.6667% per month. This compounds, meaning you earn returns on your returns.
Scenario 1: Mortgage Acceleration
Phase 1: Your normal payment ($2,121) + your extra cash ($729) = $2,850/mo goes toward the mortgage. The extra $729 attacks the principal directly, saving you from paying 4.0% interest on that chunk for every remaining month.
Phase 2: Once the mortgage hits $0, the full $2,850/mo (freed mortgage payment + extra) gets invested at 8.0% with compound interest.
Interest Saved = total interest you would have paid on the normal 20-year schedule minus total interest paid on the accelerated schedule. This is a guaranteed 4.0% return on every extra dollar put toward principal.
Scenario 2: TFSA
Pay the mortgage normally ($2,121/mo). Your extra $729/mo goes straight into a Tax-Free Savings Account, invested at 8.0%.
TFSA Balance = compound interest on $729/mo for 20 years. All growth is tax-free. When you withdraw in retirement, you pay $0 tax.
Scenario 3: RRSP (with refund reinvestment)
Pay the mortgage normally. Your extra $729/mo goes into an RRSP. Because RRSP contributions are tax-deductible, you get a refund, and you reinvest that refund, which generates another refund, and so on.
The refund loop: At your 30% marginal tax rate, $729 out of pocket becomes:
RRSP Balance = compound interest on $1,036/mo (not just $729) for 20 years at 8.0%.
This balance is before tax. You only pay tax when you withdraw in retirement. If your retirement tax rate (30%) is lower than your current rate (30%), you profit from the difference.
Canadian Tax Brackets
Your marginal tax rate (29.6%) is the combined federal + provincial rate on your last dollar of income. This is what determines the RRSP refund size. We use the 2025 brackets for your selected province.
Year-by-Year Breakdown
Hover over any row and click to see the full calculation detail