Pay down the mortgage. Or invest?
Give the same extra cash two possible jobs. Compare the investments, the debt still due, and what happens when a mortgage payment is freed up.
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One budget. Two paths.
Monthly / CADOn top of the scheduled mortgage payment. Both paths commit the same outside cash.
Effective annual return before the separate fee and taxes. Not a forecast.
Extra cash, fees and market loss
Raises only the extra monthly allocation after each 12 months, rounded to cents.
Goes to the mortgage in one path and investments in the other.
Divided by 12, deducted after growth and before new deposits. Do not double-count fees in the return.
Applies to both existing portfolios before growth and month-end deposits.
Mortgage contract and payment increases
Applied to both scheduled mortgage plans. Requotes restart the increase schedule. Extra cash is entered separately.
Monthly cash-flow date labels
Monthly dates keep the first payment’s day, clamped to shorter month ends.
Dates label equal-period cash flows only. They do not change interest, annual-increase timing or the term boundary, and are not moved for weekends or holidays. Leave empty for numbered periods.
Mortgage rate change and renewal
Compare the whole position
Assumptions$699.80 CAD
DollarMath provides calculators and information for educational purposes. It does not provide financial advice. Read the disclaimer.
A positive difference means invest-first has the higher modelled investment value minus mortgage debt; a negative difference means prepay-first does. This is not a recommendation or total household net worth.
| At the horizon | Prepay first | Invest first |
|---|---|---|
| Investments | $0.00 | $30,872.63 |
| Mortgage debt | $260,033.81 | $290,206.64 |
| Investments minus debt | -$260,033.81 | -$259,334.01 |
| Mortgage payoff | Not within horizon | Not within horizon |
| Mortgage interest paid within horizon | $149,700.61 | $155,873.44 |
| Cash deposited in investments | $0.00 | $24,000.00 |
Investments after the cash flows
Starting scheduled mortgage payment: $2,213.89. Extra cash starts at $200.00 monthly, rising 0% yearly; $0.00 is allocated in month 1. Investment return: 5% effective annually, before 0% annual fees. Fees paid: prepay-first $0.00, invest-first $0.00. No one-time loss is entered.
Mortgage assumptions: 4.5% / semi-annual compounding; 0% yearly regular-payment increase. No within-term rate change. The initial or changed rate continues after the current term.
Additional mortgage changes: Disabled. No calendar labels. Dates do not change equal-period mortgage or investment calculations.
Prepay-first sends all cash left after its scheduled payment to the mortgage, then invests any surplus after payoff. Invest-first pays its mortgage schedule and invests the allocated cash. No new borrowing is created. Taxes, account limits, lender prepayment restrictions, penalties and liquidity needs are excluded.
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Keep the debt and cash visible
Year-by-year positions
| Year | Prepay investments / debt | Invest investments / debt | Invest minus prepay position |
|---|---|---|---|
| 1 | $0.00 / $388,636.51 | $2,454.52 / $391,086.17 | $4.86 |
| 2 | $0.00 / $376,755.92 | $5,031.76 / $381,766.71 | $20.97 |
| 3 | $0.00 / $364,334.67 | $7,737.86 / $372,023.16 | $49.37 |
| 4 | $0.00 / $351,348.19 | $10,579.27 / $361,836.20 | $91.26 |
| 5 | $0.00 / $337,770.74 | $13,562.75 / $351,185.67 | $147.82 |
| 6 | $0.00 / $323,575.45 | $16,695.40 / $340,050.48 | $220.37 |
| 7 | $0.00 / $308,734.18 | $19,984.69 / $328,408.57 | $310.30 |
| 8 | $0.00 / $293,217.53 | $23,438.44 / $316,236.88 | $419.09 |
| 9 | $0.00 / $276,994.78 | $27,064.87 / $303,511.31 | $548.34 |
| 10 | $0.00 / $260,033.81 | $30,872.63 / $290,206.64 | $699.80 |
Audit monthly cash flows
| Month | Outside cash, each | Prepay: mortgage / investment deposit | Invest: mortgage / investment deposit | Prepay: investment / debt | Invest: investment / debt |
|---|---|---|---|---|---|
| 1 | $2,413.89 | $2,413.89 / $0.00 | $2,213.89 / $200.00 | $0.00 / $399,072.24 | $200.00 / $399,272.24 |
| 2 | $2,413.89 | $2,413.89 / $0.00 | $2,213.89 / $200.00 | $0.00 / $398,141.03 | $400.81 / $398,541.77 |
| 3 | $2,413.89 | $2,413.89 / $0.00 | $2,213.89 / $200.00 | $0.00 / $397,206.36 | $602.45 / $397,808.59 |
| 4 | $2,413.89 | $2,413.89 / $0.00 | $2,213.89 / $200.00 | $0.00 / $396,268.22 | $804.90 / $397,072.69 |
| 5 | $2,413.89 | $2,413.89 / $0.00 | $2,213.89 / $200.00 | $0.00 / $395,326.59 | $1,008.18 / $396,334.05 |
| 6 | $2,413.89 | $2,413.89 / $0.00 | $2,213.89 / $200.00 | $0.00 / $394,381.46 | $1,212.29 / $395,592.67 |
| 7 | $2,413.89 | $2,413.89 / $0.00 | $2,213.89 / $200.00 | $0.00 / $393,432.82 | $1,417.23 / $394,848.53 |
| 8 | $2,413.89 | $2,413.89 / $0.00 | $2,213.89 / $200.00 | $0.00 / $392,480.66 | $1,623.00 / $394,101.63 |
| 9 | $2,413.89 | $2,413.89 / $0.00 | $2,213.89 / $200.00 | $0.00 / $391,524.96 | $1,829.61 / $393,351.95 |
| 10 | $2,413.89 | $2,413.89 / $0.00 | $2,213.89 / $200.00 | $0.00 / $390,565.71 | $2,037.07 / $392,599.49 |
| 11 | $2,413.89 | $2,413.89 / $0.00 | $2,213.89 / $200.00 | $0.00 / $389,602.90 | $2,245.37 / $391,844.23 |
| 12 | $2,413.89 | $2,413.89 / $0.00 | $2,213.89 / $200.00 | $0.00 / $388,636.51 | $2,454.52 / $391,086.17 |
Exports contain your financial inputs and the complete monthly ledger. Store and share them carefully.
Should extra cash go toward a mortgage or investments?
Compare both paths over the same horizon and with the same outside cash each month. One path sends available cash to the mortgage and invests any surplus after payoff. The other follows its mortgage schedule and invests the extra allocation. Compare investment values minus remaining mortgage debt, not investment balances alone. The difference is before investment taxes and lender charges, and does not decide what is suitable for you.
Reviewed October 24, 2026 by DollarMath. Educational estimates. Sources and calculation scope.
Common questions
How is the same cash budget maintained in both paths?
Each month’s budget is the invest-first scheduled mortgage payment plus the extra monthly allocation and any selected one-time cash. Prepay-first uses that same budget: it pays its scheduled amount, directs available cash to mortgage principal, then invests any surplus after payoff. Lower renewed payments also leave cash available for prepayment. Invest-first invests the extra allocation. After both mortgages end, each continues investing the allocated cash.
What happens at zero mortgage interest and zero investment return?
With a $12,000 mortgage over one year and $200 extra monthly, each path spends $14,400. Invest-first repays $1,000 monthly and invests $200. Prepay-first repays $1,200 for ten months, then invests $1,200 in each of the last two months. Both finish debt-free with $2,400 invested, before any taxes or charges. Prepaid principal is not counted again as a separate gain.
Does this model TFSA or RRSP tax treatment?
No. Returns and final positions are before investment taxes. Contribution room, RRSP deduction and withdrawal taxes, TFSA eligibility, taxable distributions and capital-gains taxes are excluded. Fees are modelled separately. Entering an account’s name or a personal tax assumption would not establish eligibility or a complete after-tax comparison.
Can the comparison include mortgage renewal and market losses?
Yes. Advanced settings include contract compounding, annual regular-payment increases, up to six ordered within-term adjustable or fixed-payment rate changes, a renewal, annual extra-cash increases, a one-time allocation, investment fees and a selected market loss. Losses affect existing portfolios before growth and new month-end deposits. If an unpaid mortgage schedule ends before the requested horizon, the calculation stops with an error rather than erasing the debt.
Does my province change this comparison?
This is a Canadian pre-tax principal-and-interest model with user-entered mortgage and investment assumptions. Provincial tax treatment, account rules, property values and lender-specific terms are outside the calculation. Read the mortgage contract and review the cash, risk and liquidity assumptions before relying on an illustration.
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Follow the same cash.
Version ca-mortgage-investment-v2. Canadian monthly mortgage conventions; equal payment periods. References and worked examples reviewed October 24, 2026.
One household budget in every month
The invest-first mortgage follows the selected contract assumptions without an allocated extra payment. Its actual scheduled payment plus that month’s extra allocation sets the shared outside cash budget. Both paths spend exactly that amount. The allocation can grow after each full year and include a one-time cash amount in a selected month. Cash amounts are rounded to cents.
Prepay-first makes its own scheduled payment, then directs remaining available cash to mortgage principal, capped at the outstanding debt. A lower renewed or adjusted payment leaves more of the shared budget available for prepayment. When the mortgage ends, any unused cash in that payment month and the full available budget in later months are invested. Invest-first invests the extra allocation each month. Once its mortgage also ends, the shared budget consists of the continuing allocation.
The mortgage schedule
Both paths use the existing Canadian mortgage engine, with semi-annual or monthly contract compounding, cent-rounded interest, annual regular-payment increases, up to six ordered within-term rate changes and an optional renewal. The monthly rate for semi-annual compounding is (1 + annual rate / 2)^(1/6) − 1. A selected fixed payment can fall short of interest; remaining debt stays in the result. Lender triggers and permission to defer interest are not simulated.
The comparison supports monthly cash flows only. Its horizon can end before payoff. It can continue beyond payoff while investing available cash, but cannot silently continue an unpaid mortgage beyond the kernel’s supported schedule. Shorten the horizon or define a renewal when that case produces an error. Default rates are examples, not lender quotes.
Optional date labels
A first payment date labels the monthly cash ledger, preserving the chosen day with month-end clamping. Labels continue after mortgage payoff while investments continue. They do not change interest, growth, fee timing or the comparison horizon. Rate stages and the first date carry through an explicit mortgage handoff. No daily-interest or holiday adjustments are inferred.
Investment timing, fees and losses
The entered return is effective annually. Its equivalent monthly rate is (1 + return)^(1/12) − 1. In a selected loss month, both existing portfolios first lose the entered percentage. Growth is applied next, then the annual percentage fee divided by 12 is deducted. New deposits arrive at month end. A month-one loss therefore does not reduce a cash allocation invested at that month’s end.
Investment growth retains precision between months, while displayed balances are rounded to cents. Returns are held constant outside the one-time loss and are not forecasts. The two portfolios use the same return and fee assumptions, but can have different balances exposed to a loss. No new borrowing is created.
Read investments and debt together
Each position is investment value − mortgage balance. The displayed difference is invest-first position − prepay-first position. A positive value favours invest-first under the entered assumptions; a negative value favours prepay-first in this illustration. Home value and other assets are excluded from both sides. A principal payment reduces debt; it is not added again as an investment gain.
The comparison excludes investment taxes, registered-account allowances and eligibility, mortgage-interest deductibility, prepayment charges, qualification, lender privileges, inflation, transaction costs and the value of liquidity. It is not a complete household net-worth calculation, account recommendation or after-tax optimization.
An independently checked example
At zero mortgage interest and zero investment return, a $12,000 mortgage repaid over one year costs $1,000 monthly. With $200 extra, each path commits $1,200 monthly, or $14,400. Invest-first invests $200 monthly and finishes with $2,400. Prepay-first repays $1,200 for ten months, then invests $1,200 in months 11 and 12. It also finishes with $2,400 and no debt. The difference is zero before taxes or charges.
A renewal check: $12,000 at 0% over two years starts at $500 monthly. With $100 extra and a zero-rate renewal after year one over one remaining year, prepay-first has $4,800 left and a requoted $400 payment. The shared budget remains $600, so $200 of additional cash goes to principal. That path pays off in month 20, then invests the freed budget; both finish year two with $2,400 at zero returns.
Sources and practical checks
- FCAC: Prepayment options and lender limits
- CIRO: Paying down debt and investing
- Nova Scotia Securities Commission: Debt, investment returns and risk
- FCAA Saskatchewan: Investment fees
FCAC explains that contracts limit prepayments and may charge penalties. Investment regulators discuss return uncertainty and the effect of fees. Those considerations are reasons to review the scope, rather than treating the higher modelled position as personal financial advice.