Mortgage interest on your primary residence is paid with after tax dollars. Income tax is first deducted from your gross employment earnings and then mortgage interest payments are paid out of your remaining disposable income. Given that Canada mortgage payments are paid with after tax earnings, investment into your mortgage results in substantial savings and excellent returns on investment.
Think of it this way, if the effective annual interest you pay on your mortgage every year averages 7%, you will receive an after tax annual rate of return of 7% on all money invested into this mortgage.
For each $100 of canadian mortgage debt outstanding, you pay $7 of interest. Therefor each $100 reduction in mortgage debt will save you $7 in after tax payments every year. However, if you are paying taxes at a marginal rate of 40%, you will have to earn $11.66 of gross income to pay this $7 of interest. As such, for each $100 of Canada mortgage prepayment you will save $11.66 in gross income every year. This example shows that the before tax rate of return is 11.66% and the after tax rate of return is 7% Compare this to the alternative rates of return a small sum, such as $100, would earn in a savings account.
Investment into your mortgage is a great way to be mortgage free earlier and save thousands of dollars in interest. The same rules apply to investment in other debts. Credit cards are also paid with after tax earnings and usually are at much higher rates than your mortgage. The first line of attack should be against all higher interest debt such as credit cards and personal loans. Next, accelerated payment of your mortgage is a high return, risk free investment.