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Discussion Starter #1
I know the question has come up a number of times on this forum, but I'm looking for a more quantitative answer.

When looking to decide whether to buy bonds or pay the mortgage, how should I compare the rates? On one hand, the mortgage rate is known (mine is VR, 1.45% at this time, due for renewal in 2 years). It's pretty low. Now, bond returns are not high nowadays and am trying to figure out whether I should strictly compare the bond return rate vs the mortgage rate, or the question is more complicated because of before- or after-tax differences.

Thank you.
 

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Freddie, when it comes time to renew in a couple years, do you think that you'll have 1.45%?

The tax issue depends on where you hold the bonds. If it's held in a non-reg portfolio, it's taxed as income at your marginal tax rate. However, you could simply hold the bonds in a TFSA to avoid the taxation or RRSP to defer.
 

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Freddie, when it comes time to renew in a couple years, do you think that you'll have 1.45%?
No, of course not. The question is whether to do something until then.

The tax issue depends on where you hold the bonds. If it's held in a non-reg portfolio, it's taxed as income at your marginal tax rate. However, you could simply hold the bonds in a TFSA to avoid the taxation or RRSP to defer.
They are in an RRSP, specifically in an index fund, so the gain is interest-based. I was wondering if I should take some money out of it (i.e. rebalance into stocks and instead of buying more stocks, pay part of the mortgage) since the interest will be lousy for at least one year, then come back.
 
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