Quote:
Originally Posted by CroFlames
OK so does it make sense to start making lump sum payments now while I'm locked in for about 3 more years at a really low rate, or do I just enjoy this low interest holiday until I get bent over in 3 years?
Then start making lump payments when rates are high?
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Depends how low your rate is. If your after-tax return from throwing the money into a High Interest Savings Account, GIC, or Cash ETF exceeds your mortgage interest, then it makes zero sense to pay down your mortgage (assuming you have the discipline to not spend that money).
And it's far from certain that you're going to see a big increase in 3 years. You're not likely to get your pandemic rate again, but based on history, it'll probably be lower than it is now. The peaks in rate hiking cycles are generally pretty narrow. So once the Bank of Canada or the US Federal Reserve starts raising rates quickly, it takes about 2-4 years from that point for rates to drop back down significantly. And because we're already over a year into this one, that would suggest that rates will be lower in 3 years than they are now.