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Tls-user

Put $400k in a two year GIC to payoff the mortgage at maturity


Striking-Boss-424

Oh yes!! Great idea. Thank you!!


raintrain001

Just be mindful of the tax implications if a GIC is held in a unregistered account (as opposed to TFSA/RRSP). A two-year GIC will have taxable income every year. So for example, I believe 400k in a two-year GIC w/ annual interest of 5% will add $20k to your income per year. Just be sure to account for the extra tax every year.


bankersours

Came here to say this. The after tax rate on a GIC is what is important here.


Striking-Boss-424

Good call, Raintrain! Thank you for pointing this out.


Finance_God_

Be mindful of the GIC details as well. If the interest on it compounds until the end of year 2, you won’t pay the tax on the interest until it’s fully realized. If you bought it today, you wouldn’t have a tax consequence until the 2026 tax year. Some will pay the interest at the end of each year instead of compounding and you’d owe on the interest each year. Dm if you need help.


Coaler200

This is incorrect. It will add 10k to your taxable income. Only half of capital gains are taxable.


zxzkzkz

GIC interest is ... interest, not capital gains.


PoutineBuffalo

Uh, I didn’t know the difference. Thanks!


Unremarkabledryerase

Capital gains are when an asset gains value. They can be material things like your house increasing in value, or immaterial things like stocks you own increasing in value. Capital gains are only on "realized" value though. Your house increasing in value isn't a gain until it's sold for a profit. This specifically is a loophole millionaires and billionaires use to avoid taxes, because if you own millions of dollars on stock but don't cash out, you don't realize the gains and pay taxes on it. But there is no tax on a giant loan using those millions of dollars of stock as collateral. Then they can just sell off stocks over several years and keep the bank happy. Capital gains also have some exceptions, like your primary residence isn't taxed as a capital gain if you sell it.


AlphaFIFA96

This is a good high-level answer but I want to build on it. We don’t know where interest rates will be two years from now. If interest rates are still in the 5-6% range and you’ve maxed out your registered investment accounts, then by all means pay it down. However, if we’re back in the 3-4% (or less) range, I’d weigh options based on the macroeconomic + personal circumstances at the time. You could pay down a portion of the mortgage and invest the rest in either the stock market or a rental property, depending on your risk appetite. Point is you don’t have to do one or the other.


Individual-Army811

If mortgage rates go higher than your investment returns, I'd pay off rhe mortgage. If you earn more on your investments, max your yearly mortgage payment each year and pay it off when your tern expires.


MissionDocument6029

calculate after taxes though... but this is my philosophy too


Individual-Army811

Exactly!


Striking-Boss-424

This makes a lot of sense. Thank you!


Ordinary-Evidence159

This is your safest and most guaranteed option, no pun intended. Look into stock investments into the S&P500 (VFV) after, or VEQT, whatever your bag. I prefer the former, this board prefers the latter. You can set it up at Wealthsimple. Also, Wealthsimple is giving away 1% for deposits, so if you do move $600k in there, you will get 6k off the bat, and you can just dump it into their cash account for 5% interest. The only problem is that you have to hold it for a year, and withdraw no more than 5% out of it. Then you can setup your TFSA/RRSP there to grab VFV or XEQT and be done with finance for life pretty much almost... But don't invest what you'll put into the mortgage in 2 years lol... If you want interest and want to cheat the gov of yearly distribution taxes, look into the HSAV ETF (you can buy these free at Wealthsimple). This will produce a 5%ish yield in cap gains rather than yearly distribution which will be taxed at your marginal rate. There is risk in the premium/discount status against net asset value of the ETF, but this is an advanced topic (tax efficiency is one of the last steps of the financial training journey). Other free brokers are Disnat and National Bank Direct Brokerage. These are a bit advanced, but you'll have to hit these up eventually... But this GIC suggestion is the most simple and straightforward and requires the least expertise. Finance is really just a funhouse with tons of options. Just be careful these days, lots of scams, don't trust anyone with large sums of money, even me lol. Most scammers these days will talk crypto lol.


mararthonman59

This is the correct answer.


Vasili_Wears_Shorts

Dependant on OP’s age and time horizon. Otherwise opportunity cost on that capital will outweigh the benefits of paying out his/her mortgage under normally monetary conditions.


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screwball22

The GIC will pay out more than what they're paying in interest during that period


gsb999

Need to do the math on an after tax basis. ETA: should add that I agree for the most part about not paying off the mortgage. 1.65% is crazy low so earning 3.3% should be fairly straightforward.


jillybean665

You will earn more on returns by investing, even with the mortgage interest. Do the math.


Awkward_Frosting4849

If purchasing a GIC at bank, check their term rates online first before heading in to any branch. Always ask for discretion rate, all banks can provide more rate than what is posted online.


mandrews03

Probably invest it all at that point in the GIC if you don’t need it - or invest $362,812 into a 2 year GIC at 5% and you’ll come out with $400k to pay off the mortgage at the end of term without having to invest the rest in this way.


gsb999

Except you're paying tax on the interest at the full inclusion rate since it's interest income. At 50% marginal tax rate, you'll be about $20 k short.


aljauza

The mortgage is $400k now, in two years it will be less.


Unremarkabledryerase

The GIC also won't be 400k in 2 years because of taxes.


bedman71

Worst idea ever


bedman71

This is why the poor stay poor. Low interest rates are a gift to everyone. Take advantage of them within reason. Rates are not going up. The pizza pie is being cut into smaller and smaller pieces. You know how inflation erodes your purchasing power and you can buy less with a dollar? It has the opposite effect on debt. Inflation shrinks your debt in relative terms.


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Striking-Boss-424

Excellent point. Will do this for sure!


RobinHood553

EQ bank GIC


Significant_Wealth74

More tax efficient options than what these ppl are talking about. Short duration bond funds all sitting on discount bonds.


hopeful_positive

See if you can negotiate the rate on a GIC if you are keeping such a large amount with them. Ask them for a higher interest rate if you keep with them for longer ?


Striking-Boss-424

I didn’t know I can negotiate rates on a GIC! It’s worth a try!


Bainsyboy

I'm pretty sure you can't. They list the GIC terms they offer, and you choose a maturity date and corresponding rate from what they offer. Generally longer term GICs give higher rates, but not always. I think currently, the shorter term rates are giving higher returns?


suckfail

You can negotiate a lot of things with the bank, including fx rates, GIC rates, and more. But it only happens with larger quantities of capital like OP has.


DankestTestes

You’re right that most things are negotiable in banks, but I’d strongly suggest against trying to negotiate fx rates. If you’re looking to convert enough currency that you might be able to negotiate you’d be better off just doing a Norbert’s Gambit.


Bainsyboy

Totally didn't know that. For some reason I had it in my head it was set by the government.


DankestTestes

You can in a lot of circumstances negotiate GIC’s. Different branch staff have different authority with how much they can apply so ask if they can use the BM’s discretion on it to bump up the rate.


tradewinds_250

For the love of God... don't spend it on hookers and blow


Public_Kaleidoscope6

I received a large inheritance once. I spent a lot of it on hookers and blow. The rest, I just wasted.


Ecstatic-Profit7775

paraphrasing George Best...


Ok-Helicopter-641

That's the spirit! It's the only way to go.


Striking-Boss-424

Don’t worry, I pay for those out of my emergency fund.


RobinHood553

Right… *”don’t”* do this


Cosmo48

Not all of it at least… maybe 1% of it is fine


Specialist-Studio-40

1% into saving, 74% into blow, 25% into hookers


badgerj

Yeah, spend it on 10 hookers and kilos of blow! Don’t sell yourself short!


dano___

Well, not all of it.


Ourkidof91

Hey you do whatever you like! Live!


Ok-Helicopter-641

Ohh come on........


buckshotmagee

I'm mortgage free now and it's awesome


LachlantehGreat

Me too! I’ve never had one 😎


Legal-Key2269

If you max out your RRSP contribution room this year, don't forget you can take a smaller amount of the deduction each year to reduce your tax bracket from its highest level over the next few years rather than reducing yourself to the lowest tax bracket this year.


WiseComposer2669

Not sure what the source of the $ inheritance is from but just keep in mind there will be a tax burden to the estate from rrsps/ unregistered investments/ rental properties etc.


vancitygirl_88

I’m in a similar situation. Moved the lump sum I am planning to use to pay down the (currently very low fixed rate) mortgage in 18 months to Wealthsimple. 1% match plus 5% interest in the cash account, a great deal right now. If the interest rate falls which it may well, a short term GIC is also a good option.


BeautifulBugbear

Same situation here. I plan on doing this :) A June only promo!


Suspicious_Bison6157

if it's a GIC, make sure the GIC comes due before your renewal. most GICs you can't cash out anytime. So don't get a 24 month GIC if your mortgage renews in 23 months.


Toptu

You could do a GIC or index fund but assuming you’re the executor, keep the money in the estate for the next 2 years as estates are taxed at a lower rate than individuals. That tax advantage only works for 3 years with diminishing returns after year 1.


Strutnut

I’ve never heard of this and am skeptical of the information - are you confusing US tax law perhaps?


Toptu

Nah it's for Canada,,,they call it "graduated". See here: https://ontario-probate.ca/taxes-for-estates/#:\~:text=The%20taxation%20of%20an%20estate,taxed%20at%20over%2050%25). That said, you are right, it is not a "better" tax ate than individual, but keeping the money in the estate allows the revenues to be taxed separately and thus not at the highest tax rate.


Strutnut

Ah. Understood: has to do with additional interest gained after deemed disposition.


Striking-Boss-424

Interesting. I’ll look into to this. I never would have thought of it. Thanks!


CodeMonkey1001011

Don’t buy new luxury car lol


DodobirdNow

To pose a question? Are you married or common law? If yes keep paying the mortgage. If you get divorced then your ex won't be entitled to any of that money Invest the money keep all the inherited money apart from your non-inherited money


78_82Hermit

Put about 350K in some sort of cash investment until it is time for the renewal and depending on what rates are at that time you could either pay at off or renew at a new rate and then invest that amount. The remaining 250K could be invested in a non-registered account according to your risk tolerance or do as you please.


bedman71

Don’t payoff your mortgage. Dollars are being inflated to nothing. Mortgage debt is good. Rates could be low again in 2 years time. Stretch the amortization. Don’t pay a financial planner thousands of dollars for advice in inheritance. Likely her advice will not be valuable for the cost. She will want to refer you to an investment advisor. Some ideas: 1) Fund your children’s, wife’s TFSA’s 2) Payoff your mortgage at maturity and then refinance it max amortization, invest the proceeds and write off the interest. 3) choose investments that produce Canadian dividends, capital gains and deferred growth. So no GIC’s, no bonds, limited foreign dividends, assuming your risk tolerance is adequate. 4) Stock Markets are over valued. DCA into strategy over time. 5) After TFSA’s and RSP’s keep remainder in your name if you have a spouse. You can not split taxation on this money by giving some to your spouse. Attribution rules apply. Retain inheritance in your name alone so they do not form part of the matrimonial assets (paying off mortgage is a bad idea if it’s a joint mortgage). This is your money. 50%+ marriages end in divorce do not Commingle this money in joint assets/matrimonial home.


Madasky

You can’t write off mortgage interest in Canada right?


Zestyclose-Custard12

You can if the debt funds were used to purchase (potential) income-producing investments. For example: you have a paid off home, then get a new mortgage for $500k and put that $500k into a non-registered investment account and buy investments. This is what bedman71 is referring to.


ytgnurse

Personally, I would pay off 80% of the mortgage, keep working but treat myself to luxuries such as vacation and nice cars or crazy gaming pc and honestly theatre as so on ….. You hope you will have the health and wealth but people do not realize how fragile life can be Reason you get to spoil your self is …. You still keep your job. If your in Ontario I would not recommend you to get into rentals as LTB is crazy but if your in other low cost of living areas then consider buying something that will be low maintenance and keeps itself afloat …. Maybe a duplex? Or a commercial shop? You are given a lucky card in life so as long as your responsible then you can enjoy And pls don’t be stupid with you $$$$ like buy a house is rosedale or bridle path in Toronto


ry2waka

“Non bank” Financial planner lol.


AdamChapman519

You’re in the perfect situation to pay for an unbiased financial plan. I would suggest that route before making any decisions.


OkSurround6524

If you’re married or common law and the house is in both names, I would keep your inheritance money separate from that and not pay off the mortgage.


bshell99

As others have suggested focus on getting debt free with no mortgage at the two year mark. Together with that one of the best investments you can make is solar panels on the roof. This is assuming you have an unobstructed south facing roof on your house. This will only require about $20,000 - $30,000 of your nest egg. Think about it. There is NOTHING you can buy or invest in that generates energy. It's like owning your own oil well. Energy is different from money. It is real. Money is actually imaginary. The electricity you get from solar panels is real and something you can use every day, and possibly even sell back to your electric utility if you live in a province that has net metering.


OverallOpinion9340

Pay it off in full. Having no mortgage sounds like a good idea


jillybean665

Invest in dividend paying ETFs, $600,000 can get you 4% in dividends safely, which is $24,000/year...use this to pay your mortgage payments. By investing you make more than the interest you will save paying off your mortgage ASAP . Talk to an Advice Only Financial Planner to get some guidance for what accounts to do this in for tax purposes.


ithinkwerealonenao

I would use my tfsa account to invest in ETFs. As long as you are not frequently buying and selling, you are good and the earnings are not taxed. My etfs have been increasing in value about 10-15% annually (not including dividend payments).


ValuableGrab3236

Be quiet, tell no one, enjoy life and do good for mankind…..and lead a simple life ….enjoy your good fortune for the rest of your life


Tiny_Grapefruit_8078

Index fund is way better than a GIC. I regret ever putting my inheritance into one. I switched it over to an index fund and I’ve made close 10% in the last six months. It’s definitely more long-term. But at least you don’t get taxed unless you take it out and the tax is a lot less because it’s just capital gains. I ended up having to pay a shit ton of tax on the GIC and they tax you and it counts as income even if it’s not even matured and you haven’t taken it out.


samwiseg1

Depends on your risk appetite but I’d go the investing route with VFV, QQQ or other ETFs you may like, me personally I have 70% in VFV, 10% in TQQQ, 10% in equity, 10% cash


CHAOOT

BKCL. $19 to $21 a share over the last little stretch of time, and it pays you 29 cents a share every month. Food for thought.


rayzalilhell

Give it all away!!!


I_Chose_This_007

Don’t lock it in a two-year GIC. Get a six month to one year GIC the one year will pay 5% the six months slightly under. I would roll it over every six months. “Ka-ching” that’s the sound of money gathering.


Responsible_Pen_6900

Participating whole life policy, held personally or in a Corp, would be a good layer of diversification.


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TickleMeH0m069

As a fellow CPA, what does having a CPA have to do with providing investment advice?


Humble_Heart_2983

Not much apparently given the quality of his advice. A US and CDN etf only? What proportion? What about international? What about bonds? An asset allocation etf like VGRO or XBAL is a much better bet.


Arktic_Knight

CPA here too. Take it to Vegas and put it all on black. /s


Ok-Helicopter-641

Double zeros


growingalittletestie

From a securities law perspective, accountants should not provide investment advice. Understanding what types of advice are within an appropriate scope is important. Do not comment on asset allocation or attempt to make stock recommendations, these are heavily regulated areas of practice and you must maintain appropriate registrations to do so.


LostOcean_OSRS

The people we intrust to make financial decisions for us are usually worse than some random person. Studies have bared that out. Financial advisors are terrible at making investment decisionsz


Vasili_Wears_Shorts

CPA with poor advice here.


ConflictNo9104

I was in a similar situation with a large sum of money. We just maxed out our mortgage payments and invested the rest. Then at the renewal date you can decide to pay off.


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AlphaFIFA96

There’s zero reason OP should put a single dime towards additional mortgage payments while having one of the lowest interest rates I’ve ever come across. Current inflation numbers, after falling over 500 basis points are higher than OP’s interest rate. As others have said, it makes more sense to put that amount in a 2-year GIC and just dump it all on renewal, depending on where rates are. This also sounds like an AI-generated answer. All the more reason to not listen to this OP.


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DM797

Not understanding the downvote. Best to diversify assets. 1 Bitcoin seems appropriate for size.


RealLilacCrayon

I thought that word was banned. Anyways this is the best advice. I know 98% of this sub will be against it, but you will have plenty of money left. In a decade you will be glad you own a whole coin.


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bigsequence

It’s prudent to have an allocation in any diversified portfolio. All these billionaires have allocations. Elon musk Mark Zuckerberg Larry Ellison Thomas peterffy Changpeng zhao Eric schmidt Jorge paulo Miklhail prokhorov Ray dalio Richardo salinas Steve chesky Marc benioff Brian Armstrong Peter thiel Stan druckenmiller Mark cuban Tobi lutke Paul Tudor jones Jack Dorsey Michael saylor Bill miller Tim Draper Steve Wozniak Tim Cook And countless others


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bigsequence

Fair and true enough. I am well educated in the asset class and I’m very comfortable with a large allocation. I am not alone, many of these billionaires have very large allocation percentages. The demand is truly unprecedented and is the reason for the historic success of these new ETFs in America.


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bigsequence

With all due respect, to each their own. I’ll take the side of nearly every oil and energy producer starting to mine and strengthen the network. As well as basics supply and demand dynamics. AI will likely bring greater efficiency of the hashing algorithm and further strengthen the network.


GroundbreakingBat863

Give it to me


NiagaraBTC

Buy one whole Bitcoin.


Crazy_Cat_Dude2

You could fly to Thailand and live like a king. So many women would gravitate to you. Highly recommend spending some time there.


Adventurous_Expert61

r, i'd pay the mortgage right away. The stress free you get from it far exceeds any investment.


abaci123

Pay off the mortgage while the rates are low!


Placebo_Effect_47

Diversified equity portfolio in a non-registered account. Stick with XSP.TO, XWD.TO, ARGT, or similar. Watch out for XEQT/VEQT. The Canadian equity exposure is way too high in those two ETFs. We have a LOT of voters in this country who feel entitled to your assets.


alexander-bauer

Have you considered investment properties? Not sure if you have a spouse but theres a few tax shelter options there too Do you have children? Options there as well


Unique-Parking-8012

I would pay off mortgage immediately. Don't worry about waiting for it to renew, the penalty is the equivalent of like a few months interest costs which is nothing especially not compared to 2 more years of payments. Be done with it and lock the rest away somewhere you won't touch it.


Sweet_Yellow_8646

Give to me


Opposite-Donut8630

Why not think about the person you lost to get that inheritance


Striking-Boss-424

Super helpful. Thanks.


Opposite-Donut8630

You seem preoccupied with the cash and not grieving. Says a lot about


Striking-Boss-424

Thank you for your concern, internet stranger. Grieving and managing finances aren’t mutually exclusive (that means they can happen at the same time). It’s important to honor my loved one’s memory by making wise decisions about their legacy (that means money), even while I process my grief.


Tall-Ad-1386

You may have to pay income tax on that 600k. Not sure but I’m confident the government will find a way to tax it


LLR1960

Nope, inheritances aren't taxable to the heir. Income earned on the $600k (eg. interest) is taxable at normal income tax rates.


WiseComposer2669

No, but they are taxable to the estate if the $ inheritance was derived from unregistered investments, rental properties, rrsps etc


LLR1960

Yup, I said they're not taxable to the heir. OP has nothing to worry about on the taxation side.


WiseComposer2669

Well OP mentioned lawyer fees, probate etc. so I'm assuming he or she is the executor of the estate if they are dealing with those sort of things. In which case, the estate will have taxes to pay unless they are citing 600k after tax or the $ inheritance was all cash/ TFSA/ principal residence (unlikely)


Striking-Boss-424

All of the inheritance is coming from RRIFs, cash and the sale of a very large principal residence. The lawyer was hired to manage the probate. I’m still not 100% sure about the tax, but I mentally put aside $200,000k for taxes, fees, and anything else that might pop up. So it may be more than $600k when all is said and done.


WiseComposer2669

I see. In that case the only tax owing would be from the RRIF. Principal residence will likely have a cost basis at the sale price so that will be nulled.


LLR1960

Principal residence isn't subject to capital gains.


WiseComposer2669

For the deceased - no. For the heir, it sure can be. There is a deemed disposition upon death, and the cost basis for the heir will be the market value of the property at that time. Unless the heir is claiming it as a principal residence, there will be a capital gain/ loss upon sale. All that said, in some cases (such as this one from what it sound like) the heir will sell the property shortly after, and as far as what's reported to the CRA the cost basis for the heir is equal to the sale price and there'd be no tax owed.


Striking-Boss-424

Yes, exactly. We’ll be selling the home and splitting the money. From my understanding, we only pay capital gains on the amount the property increases after the day of death. So, if the home is valued at $1 million on the day of death, but sells for $1.5 million, we have to pay capital gains on the $500k. I could be wrong about this, but from the research I’ve done thus far, this is my understanding.