I’m continuing my series about the personal finance questions Canadians are asking ChatGPT about their personal finances. So far we’ve covered:
This week I’m addressing a big one in Canada’s economy and a big issue on the minds of Canadians: real estate.
Here’s the question Canadians are asking ChatGPT: “Should I pay off my mortgage or invest?”
I want to note that asking ChatGPT for advice about this particular topic came with some of the most misleading information so far.
I’m going to talk about ChatGPT’s answer in just a second, but first, I think we have to address a pretty big idea about mortgages that’s been around for generations.
Our parents and grandparents were raised on the idea of “own land, pay it off, and you’ll be secure.” It’s not bad advice overall, and it worked well decades ago because homes were relatively more affordable and retirement was largely funded through government and employer pension plans.
But that’s just not reality in today’s landscape. Millennials and younger Canadians are facing higher housing costs, job insecurity, and complicated retirement needs (read: how are we ever going to afford that!?) That means the old advice just doesn’t fit neatly into a modern world. So it’s no surprise that people are asking ChatGPT about this!
I’m going to break down the answer ChatGPT gave me into a few parts because I want you to fully understand what ChatGPT is saying, where it’s falling short (really short), and most importantly, guidance on what to do instead.
Let’s do this!
1. Interest Rate Comparisons Aren’t the Whole Story
So ChatGPT is giving you this advice to start with: “Compare your mortgage rate to potential investment returns: higher rate means pay it off, higher returns mean invest.”
Not so fast. The problem here is that the math ignores leverage. Your home appreciates (gradually increases) on its full value, not just the amount you’ve paid into it. Paying the mortgage down faster doesn’t make your home’s value grow faster, it just trims your loan balance.
And don’t forget that both interest rates and property values fluctuate. The “guaranteed math” isn’t so clean.
What to do instead: Understand that paying down your mortgage is about reducing risk, and the tradeoff to that could be a sacrifice to long-term investment growth. For your parents or grandparents, that type of security was a no brainer; but for you it might be the difference between being able to retire at 65 vs 75, or ever. Before you race to put an extra $20k on your mortgage balance, ask yourself: am I on track to meet my retirement goals without this money? If the answer is no, there might be a better use for that money.
2. The Myth of “Guaranteed Returns”
ChatGPT’s advice: “Paying off your mortgage gives you a guaranteed return equal to the interest rate.”
That sure sounds tidy, but nothing in personal finance is that simple (sorry). Rates change, home values shift, and your broader financial needs don’t stand still. The only guarantee in paying off your mortgage is that you’ve locked up liquidity (which is your money) in an asset that can’t be easily converted into cash.
What to do instead: Paying down debt is valuable, but it’s not the same thing as financial security. Liquidity (money you can actually use in a pinch) is what’s going to provide real stability. Before accelerating your mortgage payments, make sure you’ve built an emergency fund equal to at least 3-6 months expenses. Think about it this way: If you were to lose your job or face an unexpected illness, those extra payments on your mortgage likely won’t reduce your monthly mortgage obligation in a meaningful way. On the other hand, having cash set aside to cover your mortgage and living costs can carry you through until you’re back on your feet.
Making extra mortgage payments can certainly reduce your interest costs over time. But building up liquid savings offers a different kind of protection by helping you avoid taking on new debt when unexpected expenses arise, often at interest rates far higher than your mortgage.
3. Long-Term Wealth and Growth
ChatGPT’s advice: “If markets usually return more than your mortgage costs, investing comes out ahead.”
This is a blanket statement that ignores the actual numbers.
Since 1990, Canadian real estate has grown about 6.3% annually (slowing to ~5% since 2008), while Canadian stocks (TSX) have averaged roughly 8% annual growth since the mid-1990s. In other words, housing has built steady wealth over decades, but the stock market has delivered stronger long-term returns.
While the stock market has historically outpaced housing in pure growth, real estate has a unique advantage: leverage. When you buy a home with a mortgage, you’re controlling a large asset with a relatively small down payment. That magnifies your returns as the property appreciates. But once the mortgage is paid off, the leverage disappears, and you’re simply holding an asset that typically grows more slowly than the stock market.
The key difference is that your home’s value is locked into the property. You only access that equity by selling or borrowing against it, whereas investments can continue compounding and are far easier to draw on for retirement income when the time comes.
What to do instead: Let your home appreciate in the background while you build investments that can grow and generate income for retirement. That balance often puts you in a stronger position later on than simply paying down the mortgage as quickly as possible.
4. When Paying Off the Mortgage Does Make Sense
ChatGPT’s advice: “Take a balanced approach — put some toward the mortgage, some toward investing.”
I know this sounds smart but it’s actually framing mortgage repayments as equally urgent as, say, emergency funds. The reality is: if your savings (for retirement or emergencies) are underfunded, extra mortgage payments are a luxury you can’t yet afford.
Think about it this way:
- If your car breaks down and you don’t have an emergency fund, the bank isn’t going to let you dip into your extra mortgage payments to cover the repair.
- If you haven’t built up retirement savings, knocking years off your mortgage may leave you “house rich but cash poor” when you finally stop working.
So when does it make sense to pay off your mortgage faster? Once you’ve already laid the groundwork elsewhere.
- You’ve got a solid emergency fund (3–6 months of expenses)
- You’re consistently investing and are on track to meet your retirement goals
- You’re carrying little or no high-interest debt, so extra payments on the mortgage won’t come at the expense of paying down something more costly
At that point, eliminating your mortgage payment can be life-changing, but only if you still have enough invested to fund your retirement. Otherwise, you may end up having to borrow money back out of your home later when you’re no longer earning a paycheque.
What to do instead: Build liquidity and investments first. Then, when you’re financially strong, wiping out the mortgage can be the final move that frees up cash flow without undermining retirement security.
The Best Plan is Flexibility
The truth is that being debt-free isn’t always the path to security, but being flexible enough to face uncertainty and still retire on your terms definitely is.
In today’s modern world, it’s not having a mortgage that’s the issue, but being land-rich and cash-poor. We just can’t blindly rely on that old advice of “own land, pay it off, and be secure” anymore. Today it’s about building security with liquidity (cash + investments you can easily access), harnessing leverage by letting your home and your investments grow together, and once your retirement income is secure, that’s when it’s time to decide if paying off the mortgage is the right move for you.
And just one more thing: if you’re reading this and still wondering what the heck (no shame, this stuff can be a lot), contact me! I know how complex real estate can be, even for seasoned investors, so I’m always here to walk you through your best options. Together we can create a flexible plan just for you that weathers the ups and downs and gets you where you need to be, stable and steady.
