Pay off debt with RRSPs, or refinance and roll into Mortgage?
I would personally look at consolidating your debt at a lower interest rate by refinancing your mortgage. I would leave any retirement funds alone unless it was absolutely necessary to touch it with no other avenues available. However, once you have consolidated your debt into the mortgage I would pay more than the minimum amount so that you don't take too long to pay it off. I would put about 50% of the freed-up cash flow back into the repayments, that way you will be paying more debt off quicker and you will have additional cash flow to help your monthly budget. Another good point would be to go through your monthly budget to see if there is any expenses you could reduce or eliminate.
Others have suggested paying off the student loan, mostly for the satisfaction of one less payment, but I suggest you do the math on how much interest you would save by paying early on each of the loans: When you do the calculations I think you'll see why paying toward the debt with the highest interest rate is almost always the best advice. Whether you can refinance the mortgage to a lower rate is a separate question, but the above calculation would still apply, just with different amortization schedules. I concur that you should probably go with option 1.  And that is coming from a guy that refinanced all three of his properties with down to 20% equity 3 years ago to lock in either 4% 30 year fixed or 2.75% 15 year mortgage.  And I will not pay them off early because I do think I can do better than that in the market even if inflation is 0% for the next 30 years.  Just imagine when the fed stops manipulating tax rates.  I could be making more than 4% just in a checking account. Don't do it.  I would sell one of my investment houses and use the equity to pay down your primary mortgage.  Then I would refinance my primary mortgage in order to lower the payments. "In my opinion, you should pay off the student loans as soon as possible, before you start saving for the house downpayment. $26k is a big number, but you have a great salary.  (Nice!)  Up until now, you have been a poor college student, accustomed to a relatively low standard of living.  Your $800 per month plan would have you pay off the loan in 3 years, but I would challenge you to pay off this entire student loan in 1 year or less.  A monthly loan payment of $2226 will pay off your loan in 12 months. After that is done, if you take the same amount you had been paying toward your student loans and save it for your condo, in less than two years you'll have a 10% down payment saved ($50k).  The whole thing will take less than three years. There are three reasons why I recommend paying off the loan first before saving for the condo: one is practical and two are philosophical. Practical: You will save money on interest.  Paying off the loan in 1 year vs. 3 years will save you $1343.  You won't find a short-term safe investment that will beat 5% in interest. Philosophical: The loan is something current and concrete that you can focus on.  Your condo is a dream at this point, and there is lots of time to change your mind.  If the $2k+ per month amount is at all a sacrifice for you, then in a few months, you might be tempted to say to yourself, ""This month I really want a vacation, so I'll just skip this month of saving.""  For the loan, however, if you establish a concrete goal of 12 months to pay off the loan, it will hopefully help motivate you to allocate this money and stick to your plan. Philosophical: Getting used to borrowing money, making payments to a bank, and paying interest is not a great way to live.  It is better, in my opinion, to eliminate your debt as fast as possible and start getting accustomed to saving cash for what you want.  Clean up your debt, and resolve not to borrow any more money except for a reasonably-sized mortgage on your home." I can probably rent the house out for about $1,600. If sell now I can get 180k at the most. My mortgage will be $1,800 with tax and insurance. If I use the 180k to pay off the house, I can refinance the loan for a lower interest rate too. I think I know what I want to do but just need a second opinion. Thanks btw "First to actually answer the question ""how long at these rates/payments?""-  These is nothing magic or nefarious about what the bank is doing. They add accrued interest and take your payment off the new total.  I'd make higher payments to the 8.75% debt until it's gone, $100/mo extra and be done. The first debt, if you bump it to $50 will be paid in 147 months, at $75/mo, 92 months. Everything you pay above the minimum goes right to the principal balance and gets you closer to paying it off.  The debt snowball is not the ideal way to pay off your debt. Say I have one 24% credit card the bank was nice enough to give me a $20,000 line of credit on. I also have 20 cards each with $1000 in credit, all at 6%. The snowball dictates that the smallest debt be paid first, so while I pay the minimum on the 24% card, the 6% cards get paid off one by one, but I'm supposed to feel good about the process, as I reduce the number of cards every few months.  The correct way to line up debt is to pay off the (tax adjusted) highest rate first, as an extra $100 to the 24% card saves you $2/mo vs 50 cents/mo for the 6% cards. I wrote an article discussing the Debt Snowball which links to a calculator where you can see the difference in methods. I note that if the difference from lowest to highest rate is small, the Snowball method will only cost you a small amount more. If, by coincidence, the balances are close, the difference will also be small.  The above aside, it's the rest of your situation that will tell you the right path for you. For example, a matched 401(k) deposit should take priority over most debt repayment. The $11,000 might be better conserved for a house downpayment as that $66/mo is student loan and won't count as the housing debt, rather ""other debt"" and part of the higher ratio when qualifying for the mortgage. If you already have taken this into account, by all means, pay off the 8.75% debt asap, then start paying off the 3% faster. Keep in mind, this is likely the lowest rate debt one can have and once paid off, you can't withdraw it again. So it's important to consider the big picture first.  (Are you depositing to a retirement account? Is it a 401(k) and are you getting any matching from the company?)" You have a loan. You can probably assume you're going to have to repay that loan, every dollar. And every dollar that's outstanding on that loan costs you interest. So assuming you're not hit by any pre-payment penalty, any dollar that you pay down on your house right now saves you a compounded R% a year, where R is your mortgage rate. It doesn't really matter whether you're planning to sell it in a few years or not. If you pay $N, you'll save the interest + $N taken from the sale price and sent to the bank when you sell the house and move (though you might get a tax deduction on the interest). If you have a better place to park your money and earn a decent rate of return, it would be worth it to do that instead of paying down the mortgage. If you had another loan with higher interest rates, that's probably a better loan to pay off. If you can spend some of all of it on something that's actually genuinely worth R% of its purchase price a year (plus whatever the wear and tear takes away from its value, if anything) then spend it on that instead; that'd be a better investment. (For instance, investments in the stock market may offer better returns. However, that's risky! Observe that you can't lose money paying down your mortgage, and that Safety is usually relatively expensive these days, so it's not a bad deal. But if you're talking about using it for long-term retirement savings that are tax-advantaged to boot, that's another matter.) If you already have ample emergency funds and were just planning on putting the money into a savings account to rot at ~1.35% taxable interest, it's definitely worth it to pay down your balance now, unless you're about to sell (so the savings are slight) and it's a real inconvenience. As far as the RRSP goes, see my answer in  self directed RRSP for a non resident Don't forget to file your FBAR and form 8938, if applicable. -Jon The bit I don't quite understand is why you are thinking about staying in debt in the first place - you're basically thinking about shuffling around assets and liabilities in order to stay in debt? I think what I would do in your situation is to liquidate enough of the investments you have and pay off the mortgage. This doesn't change your net worth position less the fees etc that you might incur, but it'll save you the interest for the mortgage over the remaining term of your mortgage. "Be careful that pride is not getting in the way of making a good decision.  As it stands now what difference does it make to have 200K worth of debt and a 200K house or 225K of debt and a 250K house?  Sure you would have a 25K higher net worth, but is that really important?  Some may even argue that such an increase is not real as equity in primary residence might not be a good indication of wealth. While there is nothing wrong with sitting down with a banker, most are likely to see your scheme as dubious.  Home improvements rarely have a 100% ROI and almost never have a 200% ROI, I'd say you'd be pretty lucky to get a 65% ROI. That is not to say they will deny you.  The banks are in the business of lending money, and have the goal of taking as much of your hard earned paycheck as possible.  They are always looking to ""sheer the sheep"". Why not take a more systematic approach to improving your home?  Save up and pay cash as these don't seem to cause significant discomfort.  With that size budget and some elbow grease you can probably get these all done in three years. So in three years you'll have about 192K in debt and a home worth 250K or more." See my recent answer to a similar question on prepaying a mortgage versus investing in IRA. The issue here is similar: you want to compare the relative rates of funding your retirement account versus paying down your debt. If you can invest at a better rate than you are paying on your debt, with similar risk, then you should invest. Otherwise, pay down your debt. The big difference with your situation is that you have a variable rate loan, so there's a significant risk that the rate on it will go up. If I was in your shoes, I would do the following: But that's me. If you're more debt-averse, you may decide to prepay that fixed rate loan too. It really depends on your taxable income.  If you are in a higher tax bracket and expect to be in a lower tax bracket in retirement, the RRSP is probably your best bet.  If, however, you are in a low tax bracket now, then it might be best to start with your TFSA. Hope this helps! Paying off debts will reduce your monthly obligation to creditors (less risk) and also remove the possibility of foreclosure / repossession / lawsuit if you ever lost access to income (less risk).  Risk is an important part of the equation that can get overlooked.  It sounds like pulling that money out of the market will reduce your yearly tax bill as well. "Understand your own risk tolerance and discipline. From Moneychimp we can see different market results -  This is a 15 year span, containing what was arguably one of the most awful decades going. A full 10 year period with a negative return. Yet, the 15 year return was a 6.65% CAGR. You'd net 5.65% after long term cap gains. Your mortgage is likely costing ~4% or 3% after tax (This is not applicable to my Canadian friends, I understand you don't deduct interest). In my not so humble opinion, I'd pay off the highest rate debts first (unlike The David followers who are happy to pay off tens of thousands of dollars in 0% interest debt before the large 18% debt) and invest at the highest rate I'd get long term. The problem is knowing when to flip from one to the other.  Here's food for thought - The David insists on his use of the 12% long term market return. The last 100 years have had an average 11.96% return, but you can't spend average, the CAGR, the real compound rate was 10.06%. Why would he recommend paying off a sub 3% loan while using 12% for his long term planning (All my David remarks are not applicable to Canadian members, you all probably know better than to listen to US entertainers)?  I am retired, and put my money where my mouth is. The $200K I still owe on my mortgage is offset by over $400K in my 401(k). The money went in at 25%/28% pretax, has grown over these past 20 years, and comes out at 15% to pay my mortgage each month. No regrets. Anyone starting out now, and taking a 30 year mortgage, but putting the delta to a 15 year mortgage payment into their 401(k) is nearly certain to have far more in the retirement account 15 years hence than their remaining balance on the loan, even after taxes are considered. Even more if this money helps them to get the full matching, which too many miss.  All that said, keep in mind, the market is likely to see a correction or two in the next 15 years, one of which may be painful. If that would keep you up at night, don't listen to me. If a fixed return of 4% seems more appealing than a 10% return with a 15% standard deviation, pay the mortgage first.  Last - if you have a paid off house but no job, the town still wants its property tax, and the utilities still need to be paid. If you lose your job with $400K in your 401(k)/IRA but have a $200K mortgage, you have a lot of time to find a new job or sell the house with little pressure from the debt collectors.  (To answer the question in advance - ""Joe, at what mortgage rate do you pay it off first?"" Good question. I'd deposit to my 401(k) to grab matching deposits first, and then if the mortgage was anywhere north of 6%, prioritize that. This would keep my chances at near 100% of coming out ahead.)" So if I understand your plan right, this will be your situation after the house is bought: Total Debt: 645,000 Here's what I would do: Wait until your house sells before buying a new one.  That way you can take the equity from that sale and apply it towards the down payment rather than taking a loan on your retirement account.   If something happens and your house doesn't sell for as mush as you think it will, you'll lose out on the gains from the amount you borrow, which will more than offset the interest you are paying yourself. AT WORST, pay off the 401(k) loan the instant your sale closes. Take as much of the remaining equity as you can and start paying down student loans.  There are several reasons why they are a higher priority than a mortgage - some are mathematical, some are not. Should I look to pay off student loans sooner (even if I refi at a lower rate of 3.5% or so), or the mortgage earlier ...   My thoughts are that the student loans follow me for life, but I can always sell and buy another home So you want this baggage for the rest of your life?  How liberating will it be when you get that off your back?  How much investing are you missing out on because of student loan payments?  What happens if you get lose your license?  What if you become disabled?  Student loans are not bankruptable, but you can always sell the asset behind a mortgage or car loan.  They are worse than credit card debt in that sense.  You have no tangible asset behind it and no option for forgiveness (unless you decide to practice in a high-need area, but I don't get the sense that that's your path). The difference in interest is generally only a few payment' worth over 15 years. Is the interest amortized the same as a 15 year if I pay a 30 year mortgage in 15 years?  Yes, however the temptation to just pay it off over 30 years is still there.  How often will you decide that a bigger car payment, or a vacation, or something else is more important?  With a 15-year note you lock in a plan and stick to it. Some other options: