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Which wins for $6,000 a year: the RRSP or a $400,000 mortgage at 4.5%? Over 10 years in Ontario on a $100,000 income, the RRSP finishes about $9,395 ahead if investments earn 6% a year and the RRSP is taxed at 25% on the way out. The two tie at an investment return of roughly 3.9%. Below that the mortgage wins; above it the RRSP does.
These are estimates from the site’s 2026 tax engine. Both routes get the same cash, the RRSP route invests each year’s refund, and the mortgage compounds the way Canadian lenders do it.
Why is the break-even return lower than the mortgage rate?
Because the RRSP route gets a refund and, usually, a lower tax rate in retirement. On a $100,000 income each $6,000 deposit brings back about $1,805 of Ontario tax, roughly 30.1% of the deposit, and that refund gets invested too. The RRSP is taxed when it comes out, but at 25% the pre-tax return only has to reach about 3.9% to match a mortgage costing 4.5%. Spend the refund instead and the break-even jumps to about 9.6%.
How does a Canadian mortgage compound?
Fixed-rate mortgages in Canada compound twice a year, even though you pay monthly. The Financial Consumer Agency of Canada’s sample fixed-rate agreement lists interest compounded twice per year and charged monthly (Financial Consumer Agency of Canada: sample fixed-rate mortgage agreement). That makes the monthly rate slightly lower than the quoted rate divided by 12. On $400,000 at 4.5% over 25 years the payment is about $2,214 a month, and the balance after 10 years is $290,206. Add $6,000 a year to principal and that balance drops to $212,940, with $17,266 saved in interest.
When does paying down the mortgage win?
Whenever your realistic return after fees sits below the break-even. At 0% the paydown is $14,218 ahead after 10 years. At 4% the RRSP route is ahead by just $591. The mortgage saving is guaranteed while your lender holds the rate; the RRSP return isn’t. A lower bracket shrinks the refund and pushes the break-even up: at a $40,000 income the refund is 21.5% and the break-even is 5.4%. The horizon matters less, with break-evens of 3.2% over 5 years and 4.2% over 20.
What does the comparison leave out?
Risk, for a start. It also ignores your actual RRSP room (the 2026 dollar limit is $33,810, see Canada Revenue Agency: RRSP limits), prepayment limits in your mortgage contract and a renewal at a different rate. A TFSA is a third home for the same cash, covered in the TFSA vs RRSP calculator. For a plain extra-payment schedule, try the mortgage prepayment calculator.
Where does this information come from?
The RRSP limit comes from the Canada Revenue Agency and the semi-annual compounding convention from a Financial Consumer Agency of Canada sample agreement. Refunds, balances and returns come from the site’s own 2026 tax and mortgage engine. Checked in October 2026. This is an independent information site: we provide no services, we do not represent the CRA or any organization, and we do not guarantee that anything here is accurate or current. We accept no liability for decisions based on it. Check the official source before you rely on it. See the full disclaimer.
Frequently asked questions
Is it better to pay off my mortgage or invest in an RRSP?
It depends on the return you can expect after fees against your mortgage rate. With the default inputs, a mortgage at 4.5% and a refund of about 30.1%, the RRSP route breaks even at roughly 3.9% a year.
Does the RRSP refund have to be reinvested?
The refund is what tilts the comparison toward the RRSP. Spend it and the RRSP route loses that compounding, so the break-even return climbs above the mortgage rate.
How are mortgage payments worked out in Canada?
Interest compounds twice a year on a fixed mortgage and is charged monthly. For $400,000 at 4.5% over 25 years the payment is about $2,214, a little lower than a monthly-compounded loan would cost.
Can I do both?
Yes, and plenty of people split the money. Put in enough to capture the high-refund part of your income, send the rest to the mortgage or a TFSA, and run each split through the calculator.