Debt2 min read · Updated October 21, 2026
Pay down the mortgage or invest? A Canadian comparison
How to decide between paying down a loan or mortgage and investing in a TFSA in Canada, with a $20,000 example and the break-even return to beat.
The core idea
Paying extra on a loan earns your loan rate, with no risk. Investing may earn more, but it is not guaranteed and gains may be taxed. So the question is whether investing beats your loan rate by enough to be worth the risk.
A worked example
$20,000 over 10 years. A 5% loan is a sure 5%, about $32,578. Invested at 6.5% tax free in a TFSA, about $37,543. Investing wins by about $5,000 if the return holds, but it may not.
A simple rule
Use the TFSA room first if the loan rate is low, and put extra on the loan if the rate is high or you value certainty. Splitting is reasonable.
Check before you overpay
Check your mortgage prepayment privileges and penalties, and keep a cash cushion before putting money anywhere else.
Common questions
Is paying off a loan a good return?
Yes. It is a sure return equal to your loan rate, with no market risk.
Can I do both?
Yes. Many people split the money, keeping a cash cushion first.
Does the investment return include tax?
Compare after tax. The calculator lets you enter a tax rate on gains.