I thought I would switch gears for this post, and post an opinion about mortgages.
If you have extra funds, should you invest them or pay or and or significantly reduce your mortgage debt? The mortgage expense on your property is usually always going to the biggest expense or high on the list to you as an investor or even a home owner. This debt on the property and the expense month after month is always going to be on your mind.

I recently read an  article, about the congratulations that an individual was receiving, about working 100 hours per week, for a few years to pay off the entire mortgage.I can emotionally get behind the average citizen congratulating the individual on the achievement, here is why i think that does not make sense financially.

In the media, recently we have all heard about the rising concern about personal debt that individuals are having and the levels of concern the government has about this debt. I agree these levels are concerning, however it also gives the idea that debt, is a terrible idea and  is something that you should rid yourself of, as fast as you can.

Getting back to my article; Should I invest, or should i pay down my mortgage. For arguments sake, lets say  I have a five year mortgage at 2.50% interest per year.

If I Do Not Pay Off My Mortgage – What Are My Options?

• Invested in a financial firm, I could make a return perhaps of 4%; if I paid of my mortgage, I would lose out on this investment, and therefore in this scenario, I have lost the 1.5% gain (4% – 2.5% interest) I could have made.
• Tax Advantage – Mortgage expense is a tax deductible expense – When you invest, your mortgage expense is an expense you can deduct when calculating net profit for tax purposes.
• Value of Property Does Not Affect Your Mortgage Payments- The current assessed mortgage value is what you bought the property at. If for example you bought at $350,000 and its currently worth $390,000, you are paying a mortgage at $350,000, regardless of what it the value is at. (Property tax assessment not withstanding)

If I Pay Off My Mortgage – What Are My Options?

• Lower Carrying Costs – Carrying costs refer to the expenses incurred for maintaining a property, you do not have a burden of a mortgage to still take care off. Your carrying costs are significantly reduced, thus reducing upkeep if you use the property as an investment.
• Risk Reduction- By owning the property you can reduce the risk significantly of liquidity of the property (liquidity – how quickly can I sell the asset) as there is no longer the third party wanting payment.
• External “Threats” – Recently in Canada, there was an increase in mortgage insurance – If you own the property this does not affect you – while if you had a mortgage with a down payment of less than 20%  – You would be subject to this increase.

Conclusion:

In conclusion, I would hope that through this article, I have opened up your thinking, and that you have seen – Do not always think emotionally, you must think strategically. The notion of not having a mortgage or significantly reducing it could seem like a good idea, however is it?

I leave you with this –
Whilst Debt is Perceived as Bad, Controlled Debt can be strategically Used.