Should Christina use her entire early inheritance to pay down the mortgage?
FP Answers: Check if the mortgage rate is higher than expected investment returns, and decide whether to buy a bigger home
Christina, a 40-something woman, is set to receive an early inheritance of $500,000 from her parents. The couple, both in their 40s, are homeowners with a $450,000 mortgage remaining on their $900,000 property. Both have jobs, with Christina recently starting a position that includes a defined benefit pension plan, while her husband does not have a pension.
The couple also has $30,000 saved in each of their registered retirement savings plans (RRSPs) and $50,000 in tax-free savings accounts (TFSAs). They regularly contribute to their children's registered education saving plans (RESPs) and give $5,000 to charity each year. With an annual combined income of $140,000, Christina is considering whether to use the majority of this inheritance to pay off the mortgage.
However, her husband wants the mortgage paid off immediately. The decision becomes more complicated when considering the potential need to relocate for more space or a shorter commute to work. Given the potential for unforeseen events in life, such as a possible divorce, Christina wonders if paying down the mortgage is the best use of this money.
She is seeking advice on whether there might be a more suitable alternative for this inheritance at this stage in their lives.
Written by urgent.news from Financial Post's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
