Since we're in the realm of talking about mortgage pre-payments:
Pro's of making bigger/additional payments:
- Guaranteed interest (savings) at the mortgage rate you're paying, tax free
- Lowers the amount owing/ammortization on the mortgage (all principle!)
Con's of making bigger/additional payments:
- Money is tied into the mortgage and can't be withdrawn unless you refinance
- Interest (savings) is "limited" to the mortgage rate you're paying (albeit tax free)
- Can't use the money for other savings such as RRSP's (I'm assuming you've paid off any other higher interest loans)
Anything I've missed?
Before when I was stuck on a fixed mortgage at > 5% putting money against the mortgage seemed like a no-brainer. Now that I'm currently paying 2.3 on a variable, I'm more inclined to keep that money "accessible" in TFSA rather than sink it into the mortgage...
Oh, and to the OP -- I think your decision depends on the size of the mortgage (and therefore the size of your payments), your risk tolerance, how stable you'll be financially over the next 5 years and 10 years. The room for additional payments can be nice, but as pointed out above, it may not make much difference in the grand scheme of things unless you're actually going to be making significant lump sum payments in addition to the mortgage.
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