Paying a mortgage down is a guaranteed, tax-free return equal to your rate. Investing might beat it, and might not. This runs both to the end of your amortization on 2026 British Columbia rates — and tells you the return your investments would actually have to earn before the gamble is worth taking.
Your numbers
The amount in question — prepay it or invest it.
The answer
Investing has to beat
Prepaying clears the mortgage
Interest you would never pay
Net worth, month by month
Where the answer flips
What this assumes
A Canadian fixed-rate mortgage, compounded semi-annually, not in advance, with monthly payments — so the effective monthly rate is (1 + rate ÷ 2)1/6 − 1, not rate ÷ 12. A variable-rate mortgage compounds monthly and will differ slightly.
Mortgage interest on your home is not deductible in Canada, so paying it down returns the full rate, tax-free and guaranteed.
Both paths are compared at the end of your original amortization, when the mortgage is gone either way. Once the prepaid mortgage clears, the whole freed-up payment is invested.
Prepayment privileges are assumed to allow the extra. Most lenders cap annual prepayments at 10–20% of the original principal — check your contract.
In a non-registered account, 35% of the return is treated as interest and dividends taxed each year at your marginal rate, and the rest as capital gain taxed at the 50% inclusion rate when you sell.
Tax rates are held at 2026 British Columbia levels throughout, and your mortgage rate is assumed to hold for the whole amortization. Neither is true in practice.
This calculator is an illustration, not advice. The most important thing it cannot model is risk: paying down a mortgage is a certain return, and an investment return is not. It also ignores liquidity — money in a mortgage is hard to get back, money in a TFSA is not — along with employer matching, mortgage insurance, and what a market fall early in the period would do to the result. Speak to Brent before acting on it.
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