Rental property, RRSP, TFSA, or just kill the mortgage?
The same money, four places, all shown after tax at the end of the period — because gross returns lie and the tax treatment is the whole argument. One thing to know before you start: your defined-benefit pension shrinks your RRSP room well below the 18% of salary people assume, so this asks for your real number rather than inventing one.
Your money and your taxes
Paying this down is a guaranteed, tax-free return. It’s the bar the other three have to clear.
Read it off your notice of assessment or your CRA account — not 18% of your salary. Your pension takes most of it. The 2026 ceiling is $33,810 before any pension adjustment.
Also in your CRA account. The 2026 year adds $7,000 on top of anything unused.
The rental you’re considering
20% is the minimum on a property you won't live in — insured mortgages are for owner-occupied homes.
Taxes, insurance, upkeep, fees.
One rate drives both — costs rise with rents.
Agent commissions and legal fees when you eventually sell.
On these numbers, after 20 years and after tax
Buy the rental
Ahead of the next best by $91,258
What you’d be left with, after tax
$80,000 of it wouldn’t fit there, so it went against the mortgage instead.
$85,000 of it wouldn’t fit there, so it went against the mortgage instead.
What the rental has to do to win
2.27% a year
That is how fast the property has to appreciate, every year for 20 years, just to match the best of the other three. You have it set to 3%. Nobody knows which is right — but now you know what you’re betting on.
The rental’s first-year reality
−$725/mo
That is what the property costs you every month in year one, after tax — money you have to earn elsewhere and feed it, on top of the $100,000 you put down. Plenty of rentals still win on the sale; just go in knowing you are funding it.
An illustration, not advice. Nothing here is tax or investment advice, or a commitment to lend — take the answer to an accountant before you act on it. And read the rental honestly: it is the only one of the four using borrowed money: $100,000 of yours controlling a $500,000 asset. That leverage is exactly why it can finish far ahead — and exactly why it can finish far behind, because the loan stays the same size whether the market rises or falls. It also comes with a tenant, a roof and a phone that rings at 2am, which on a rotating shift is not free even when the arithmetic works, and it is one property in one city rather than a spread. Against all that: it is the only option where someone else pays down your loan. Those are judgement calls, not math, and this tool has no opinion on them.
The rules this runs on — and how the math was verified
Every path gets the same money. Anything that can’t legally go where you aimed it — over your RRSP or TFSA room, or left over after the down payment — goes against your mortgage rather than disappearing, so no option is quietly handed a dollar the others don’t get. Paying the mortgage down is valued as debt that never accrues: it compounds at your own mortgage rate and is never taxed, which is why it is the benchmark.
Tax treatment, checked at the source. The RRSP is deducted now, grows untaxed and is taxed as income when drawn at the retirement rate you set; the refund is treated as real money arriving next spring. The TFSA gets no deduction and is never taxed. Rental profit is ordinary income at your marginal rate, and only the mortgage interest is deductible — never the principal. On sale, half the gain is taxable at your marginal rate: the proposed increase to two-thirds was cancelled on March 21, 2025 and never took effect, so one-half is what applies. Contribution ceilings quoted in the fields are CRA’s 2026 figures.
What is deliberately left out. Capital cost allowance and its recapture, land transfer tax and closing costs when you buy, investment fees, and tax on any non-registered growth. Rent and costs both escalate at the single growth rate you set, and a month where the property loses money is assumed to shelter other income at the same rate. Money the property costs you month to month is carried at the investment return, since that is what you gave up to feed it.
Two simplifications that matter. First, the whole capital gain is taxed at the single rate you entered — but a gain this size largely lands in the top bracket, so the real tax bill is higher and the rental here flatters itself by tens of thousands. The RRSP is simplified the same way, taxed in one go at one retirement rate rather than drawn down over years. Second, paying down your own mortgage is valued as if you would otherwise still owe at least that much for the entire period; if your mortgage would be gone sooner, that column is generous too. Together with the omissions above — which work against the rental — treat the gap between any two columns as a direction, not a promise.
The engine passes 60 automated checks — the paydown and capital-gains figures pinned by hand, the spill rule proven to conserve every dollar, zero contribution room collapsing exactly onto the mortgage path, an independently written second simulation of the rental agreeing to the cent, and the RRSP-versus-TFSA crossover behaving as tax rates move. Arithmetic and tax citations last verified August 8, 2026. It is an illustration, not tax or investment advice, and not a commitment to lend. Before you act on it, take it to an accountant — and if the rental wins, talk to us about what you’d qualify for.
One of the Mortgage Guru family’s 60+ free calculators — counted honestly. Want the mortgage interest itself working for you? See whether the Smith Manoeuvre fits.