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I'm in the process of paying down my mortgage and each year my plan is to put 10% down as that is my prepayment allowance per year. Previously I've made 10% lump sum payments, but I'm now considering the possibility of putting the payments into a savings vehicle that matches the interest rate I'm paying (3.9% fixed) and then when my mortgage term expires paying out the proceeds. This would give me the peace of mind that if things change I can get at the money instead of it being locked into equity. I've also considered setting up a HELOC, but I've dismissed it for a variety of reasons I won't go into. I've also dismissed increasing my payment more (I currently have it amortized over 14 years remaining, so I'm making increased payments that I am comfortable with) as a big chunk of what I use to make these payments arrives at tax time as I am unable to have my tax contributions reduced at source.

My question is, is there anything that I can put into my TFSA that can guarantee a 3.9% return? If not, what's about the best I can get guaranteed? I'm not concerned about real return (ie net of inflation) because the purpose is to pay a mortgage that is fixed. Market linked GICs seem like a possibility, but I don't know much about them, and of course they're not guaranteed. I guess the only vehicle I'm really aware of is GICs, can I purchase GICs from one institution and put them into a TFSA held with another institution? Are there other options that return a guaranteed return as GIC rates are in the toilet right now. The time horizon is about 4 years, but each yearly contribution will have one year less horizon. Meaning, the current contribution can sit for 4 years, but the one next year will only be able to sit for 3 years.

Also, I don't wish this thread to become a debate of RRSP vs mortgage paydown vs TFSA please. I am contributing to all three concurrently and the topic has been discussed to death throughout the internet.
 

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I don't think there is a 'guaranteed' investment that meets your criteria, so the answer is no. You could perhaps buy bank bonds with maturity matching your mortgage renewal, but that isn't guaranteed. In fact, the only investment that meets the measure is government of Canada bonds, since that is what GICs are backed with.
 

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Also note, since the mortgage is larger than your annual savings, it has more to compound against it self. (creating more interest.) You would be better off applying extra money right to your mortgage. You will notice your principal payment will increase slightly, interest portion decreases slightly, every time you do this. This is the effect you will not get by putting your money in a savings account. (Due to the savings being a lot smaller)
 

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Do not invest money like that, very dangerous.

I remember in 2007 when a woman was trying to get me to do the smith maneuver.
I was like, what if the market tanks? Her answers didn't sit well with me and I got the heck out of there. For months she kept sending me brochures...funny, I haven't got one in a while, lol.
I guess 2008 proved my instincts correct.

3.9% with no loss of principal isn't going to happen. Buying something would be a gamble.

I agree with the others, do your best to pay off your mortgage, that's your guaranteed 3.9% right there.
 

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Since you're looking for liquidity 'just in case', I think you really are best off just securing a HELOC and paying down the mortgage.
 
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