Lump Sum Payment Strategy / Use your RRSP refund pay down your mortgage
Here is a great way to use your tax refund to repay / pay down your mortgage. It does make a difference.
But you still have to live. I recommend using 1/2 of it for this and the other 1/2 for something you NEED, not want.
Lump Sum Payment Strategy
Tax Season is fast approaching and the average Canadian tax refund is approximately $1600. An excellent use of these funds would be a lump sum mortgage payment. If a client was to do so they could save thousands of dollars in interest over the life of their mortgage. For example:
Mortgage Amount $300,000
Mortgage Interest Rate 3.25%
Approx. Interest Savings Over 25 years $1,600 x 3 = $4,800
The above savings might seem trivial if looked at as a one-time event, however if you continue this strategy on a yearly basis they could save over $17,000 in interest over the life of their mortgage. Additionally, this would help you become mortgage free almost 5 years faster.
***note the above calculations are based off a 25 year amortization, a higher interest rates would increase the savings***