While we’re on the theme of prepayments, here’s another prepayment idea.
This year’s average Canadian tax refund is $1,506 according to Canada Revenue Agency (Source: FP).
That’s enough for a shiny new TV, laptop, trip to Vegas or…a mortgage pre-payment.
If you have no higher-returning uses for the money, why not plop that hard-earned refund down on your mortgage? A $1,500 lump sum pre-payment is a risk-free investment that will save over $2,300 in interest over the life of your mortgage.*
The best part is, unlike earned interest (from a GIC or traditional investment), you don’t pay tax on mortgage interest you save.
* Example based on a 25-year amortization and 3.99% interest rate.