Speaking out on investment in real estate has been a passion of mine for years. In fact, real estate ownership is your retirement pension, your salvation! If you don’t own, buy! If you do own, payoff that non-deductible mortgage as quickly as you can.

You know of course that before you take advantage of any growth in any investment, you must own all of the investment, except when it comes to your real estate holdings. You get to claim as yours the increased equity (due to a rise in market value) although you don’t own the real estate until the mortgage is fully paid. What a deal! Every promoter of mutual funds and most stockbrokers speak of yearly increases in their product yield by percentage, "our growth fund has averaged 15 percent in the last four years!", sound familiar? Let’s compare products. If your mutual fund goes up 15 percent per year (start with a $10,000 investment) and that $100,000 house you bought with $10,000 down (it only increases 5 percent per year). After the first year, the investment grew $1500 (that’s 15% of $10,000) but eventhough the initial investment was similar, your house value went up $5000. You still owe the bank on the house but the increase in value is all yours. After ten years the investment is worth $44,000, a taxable increase of $34,000 on your initial investment. Your house of the other hand has increased $63,000, all tax-free! You have also paid down the mortgage by $20,000 and kept your housing payments relatively stable while the other investor has been paying increasing rents for the last 10 years. Once your residence is paid, you can now re-borrow on that asset and buy other investments, whether real estate or mutual funds, and the interest on this new mortgage is now tax-deductible. I know what you are going to say. I have heard the statement many times over the last 20 years: "paying off the house is but a dream!".

Today, lending institutions, are giving you, John and Jane Consumer, every opportunity to pay off your mortgage prematurely! Lending institutions will allow increased payments at certain intervals. They will allow bulk payments at certain intervals. Some of them even offer open mortgages, which mean unlimited pay down and flexibility. Why do they offer you these gifts? Obviously to stay competitive with one another, but also because they know from experience that few of you will ever take advantage of their generous offer.

We have all heard but few have grasped the fact that 13 monthly payments per year instead of 12 or paying weekly (it’s the same thing) will save you seven years on a normal 25 year mortgage. If your mortgage payment was $1000 per month, that extra payment per year or paying weekly just saved you $84,000 over the life of the mortgage, and retired the mortgage in 18 short years.

Targeting 20 years instead of 25 years as the amortization on an average $120,000 mortgage would increase your payments by about $2.50 per day. If you quit smoking in the New Year, spend the same three dollars a day on your mortgage rather than on the "habit" that would save you some $73,000 in interest. Better still, increasing your payment by a $5 per day would fully amortize your $120,000 mortgage in 15 years instead of 25. The sad fact remains that most of you will be paying for 25 years before you can use your house equity to invest. The investment potential of paying off your house is incredible. I was that an investment show last weekend, at the Congress center. Investment opportunities abound. Whether topping up your RRSP, or buying mutual funds, or buying investment property, all of it becomes so much easier if your own residence his paid off.

I should add this point that my preference from an investment pointed view, is indeed real estate. The fact remains that your initial target for investment is buying a home, then paying off that non-deductible mortgage.