Your Mortgage is the Best Investment

For your highest and safest return on any investment it is time to pause and look up...to the roof that sits over your head because your home (due to the mortgage that goes along with it) is your best investment.



Would you believe it if you were told that with the investment market in Canada that there is a very safe and secure investment out there that pays around 7 percent annually? This is guaranteed, by the way, with no questions asked or big moves to be made. Would you think you were having your leg pulled?



Its Not Rocket Science



No, this is not something illegal and it's no pyramid or money scam, and no it is not some crazy hot tip on a stock that is going to sky-rocket.



..And no it has nothing to do with some kind of gambling trick or some hot horse out there that is going to dominate the competition in a race at the local track. None of these things just mentioned are guaranteed. Take a look at the past year and a bit, the time we have dubbed a "financial crisis" and you will be reassured of the fact that there are very few guaranteed investments.



It also doesn't even involve a guaranteed investment certificate (GIC), which are thought of as sometimes the safest guaranteed way to make good on an investment.



In fact, with a GIC nowadays, even if you are spending some serious bucks you would be lucky to get half of that percentage rate (the 7 % mentioned above) on a 5-year GIC.



Paying Down Your Mortgage



Well, in case you have not figured it out from the article title by now...the amazing investment opportunity that accomplishes all of this is actually the process of paying off ones mortgage. I know...sounds crazy doesn't it. Paying off our mortgages is the best investment?



Some people would probably even laugh at this thought but think about it, paying off your mortgage is the best investment you can possibly make; here is why.



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Well beyond the fact that today's mortgage rates are still ultra low when compared to their complete historical past is the fact that it is almost completely impossible to find any investment out there, other than paying your mortgage down, that is going to be a sure thing in regards to yielding a higher after-tax return. In other words no other investment out there is going to result in two things...being guaranteed to yield a high after-tax return.



Still not following?Let's take a look at some math involving some money.



In the case of one's mortgage...your money.



Theoretically let's say you are locked into a fixed-rate (closed-rate) mortgage at 4 %; which is basically the lowest rate you will find right now in Canada currently on any popular five-year term mortgage from lenders in the country. This means that for every $1000 in principal you would be paying $40 in interest annually.



Perhaps you were to make a lump-sum payment of $1000. You would find that you have saved yourself $40 in interest and this would result in an effective after-tax return to you of 4 %.



Not too bad eh? Well it gets even better when you consider what it would take for you to have accomplished the same with a taxable investment in regards to generating the same return.



Guaranteed Returns



Let's talk you annual income for a minute. If you are someone who is in the 40 % tax bracket you would have to earn 6.7 % on a GIC to end up with 4 % after the government takes a big hack out of your earnings. If you can find a GIC that pays anything even close to 6.7% let me and every other Canadian know because you could make a lot of money selling this info.



Not to mention that you would probably want to pour into this investment a lot of your own money because you won't ever see this rate again.



Don't forget the language we are dealing with here is guaranteed returns. Obviously you could end up making a lot more money trading stocks or options. However, they are not guaranteed and in fact with that path you could end up losing a lot of money. The best part of paying off your mortgage is that the return you will be getting from it is risk-free.



It is not very often an investor hears those words..."risk free". It's a beautiful thing.



Remember next time you are cursing having to pay your monthly mortgage fee that in fact you are simply paying into the greatest guaranteed return investment known to man.