Battle Between GIC And Mortgage


A lot has been said of asset allocation, but can we do better than bonds or GIC’s for our fixed-income asset class?

The best current 5-year GIC rate is 4.40%. After paying for taxes, you only keep 3% depending on your tax bracket. That’s barely above inflation! A better option may be to pay down your mortgage. The going rate for a 5-year fixed mortgage is 5.1%. Since a dollar saved is a dollar earned, saving 5.1% on your mortgage is a better deal than earning 3% from bonds or GIC’s. After all, why lend your money to the financial industry just to re-borrow it back at a higher rate?

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Comment Number:
1
Written by:
Canadian Dream
Posted on:
April 20, 2007 at 3:05 am

First off - welcome to the world of blogging. It’s always great to see another Canadian on board.

It is rather horrible how low fixed income rates are right now. I can almost understand all those people who invested in income trusts trying to find some yield.

Best of luck,
CD

Comment Number:
2
Written by:
Financial Jungle Guy
Posted on:
April 20, 2007 at 6:01 am

Thanks for laying down the welcome mat, Canadian Dream.