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Canadian CoastFI(RE) Calculator

Mortgage Accelerator Lab (What if scenarios)

One of the most common financial dilemmas—and a frequent question I receive—is deciding what to do with extra cash flow: Should you aggressively pay down your mortgage, or invest the difference in the market?

For example, paying off a $500,000 mortgage at 3.5% provides a guaranteed, tax-free return equal to your interest rate. However, investing that same money might yield historical market returns of 7-10%, compounding over decades (though likely not entirely tax-free).

The aim of this tool (rough math estimate) is to help you visualize the differences between the paths based on your specific mortgage terms and tax situation. Of course, even if one path looks mathematically superior on paper, there are multiple other factors to consider. These include your risk tolerance for a sustained market downturn, the opportunity cost of missing out on outsized market returns, a potential drop in your home's value, or simply the peace of mind that comes with being completely mortgage-free.

Disclaimer

This lab provides educational estimates (very rough math; assumptions). Mortgage rules, tax implications, and market returns are complex and variable. This is not financial advice. Experiment with the parameters to see how different scenarios play out.

🧪 Lab Status: This tool is currently in Active Beta (Last Update: April 2026). We are actively refining the math engine. If you notice any calculation discrepancies, please submit feedback.

Mortgage vs. Investing Scenarios

Mortgage Details

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How many months left before you have to renew your mortgage. This will be highlighted on the chart to show where rate risk begins.
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Applied directly to principal once a year (Path A) or invested once a year (Path B).

Investment Strategy

Monthly Allocation

Divide your extra cash flow across these accounts for Path B:

Tax Considerations

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Used to calculate taxes on Non-Registered returns. For simplicity, we assume growth comes from capital gains, which have a 50% inclusion rate in Canada.

Model Assumptions & Methodology

To keep this tool functional and easy to use, we use a mix of your specific inputs and standardized mathematical assumptions. Here is exactly what is happening under the hood:

What You Control (Inputs)

  • Mortgage Variables: Current balance, interest rate, remaining amortization, and term remaining.
  • Cash Flow: Extra monthly payments and annual lump-sum prepayments.
  • Investment Strategy: Expected market return, marginal tax rate, account allocation weights (TFSA/RRSP/Non-Reg), and whether to reinvest RRSP refunds.

What The Model Assumes (Logic)

  • Canadian Mortgage Math: Mortgages are calculated using standard Canadian semi-annual compounding, which we convert to an effective monthly rate behind the scenes
  • Constant Rates: The model assumes your mortgage interest rate and your expected market return remain perfectly constant every month for the entire duration of the timeline
  • Fixed Payments: Standard monthly mortgage payment is locked in on Day 1 based on your initial balance, rate, and amortization. It does not fluctuate
  • Capital Gains Tax Proxy: For Non-Registered accounts, the model assumes 100% of the growth comes from capital gains (which have a 50% inclusion rate in Canada). It applies your marginal tax rate to half of the growth as a continuous "tax drag". It does not model specific dividend yields
  • Annual Timings: RRSP tax refunds and annual lump-sum prepayments are calculated and applied at the exact end of every 12-month cycle. To be conservative, the model assumes your registered contribution room may be maxed, so any generated RRSP tax refund is automatically reinvested directly into your Non-Registered accounts
  • The Post-Mortgage Pivot (Path A): The moment Path A pays off the mortgage, the model automatically takes the entire monthly cash flow (your old standard mortgage payment + your extra payment) and invests it every month until the end of the original amortization period