Opinion column by the ImmoMulti Team. Facts are sourced; opinions are our own. This is not personalized tax or financial advice.
You've got cash sitting idle after a good year of rent. The question that splits every investor group: should you pay down your plex mortgage faster to sleep easy, or reinvest the cash in another building to grow the portfolio? As a direct buyer of multi-unit properties on the North Shore, we take a side — but the pay-down versus reinvest trade-off hinges on one number too many investors skip.
🔥 The Opinionated Take
Our position: in the 2026 rate context, paying down faster is not the "safe but a bit dumb" choice it's caricatured as — it's often the best risk-adjusted return a North Shore plex owner can get. The Bank of Canada held its policy rate at 2.25% on June 10, 2026, a fifth consecutive decision, and the prime rate stayed at 4.45%. In plain terms: rates aren't collapsing. In that backdrop, reinvesting with leverage is only justified if the expected net return clearly beats your after-tax net mortgage rate. When it doesn't — and it often doesn't — paying down wins. Growing the portfolio for growth's sake is ego, not strategy.
Source: Bank of Canada — Policy rate announcement (June 10, 2026).
The Real Benchmark: The Net Rate, Not the Posted Rate
Every dollar of principal you pay down "earns" you the interest rate you avoid — a certain return, with no market risk and no management. It's the most peaceful investment there is. But beware of comparing that return to the wrong number. The right benchmark isn't your gross mortgage rate; it's your after-tax net rate once interest deductibility is factored in.
Concretely: a 5% rate on a rental building's mortgage, with deductible interest and a marginal tax rate of, say, 40%, really costs around 3% net. Paying down that debt is therefore a guaranteed after-tax return of roughly 3%. Reinvesting has to beat that number, after tax and after paying for the extra risk — not the posted 5%.
| Criterion | Pay down faster | Reinvest (leverage) |
|---|---|---|
| Return | Certain (net rate avoided) | Potentially higher, uncertain |
| Risk | Low — reduces debt | High — amplifies gains and losses |
| Liquidity | Capital locked in the building | Capital deployed, often illiquid too |
| Taxation | Loses the interest deduction | Keeps/increases the deduction |
| Renewal sensitivity | Better DCR, less exposed | More exposed to rate hikes |
Leverage Isn't Free — Especially in 2026
The "reinvest" camp's headline argument is leverage: with a modest down payment you control a bigger asset and capture all its appreciation. True — when rates fall and values rise. But leverage also amplifies losses and inflates your fixed costs. Every additional building means more debt, more renewal sensitivity, and more exposure to the surprises a North Shore owner knows well: vacancy, major repairs, rental-tribunal delays, and rising taxes and insurance premiums.
Paying down, conversely, mechanically improves your debt coverage ratio (DCR) and makes you more resilient at the next renewal. With the policy rate stuck at 2.25%, no one can promise you an imminent drop that would rescue an over-stretched deal. Betting on leverage "because rates will fall" is exactly the kind of lazy reasoning that tends to end badly.
Deductibility Really Does Change the Math
Here's the crux — and what gives the "reinvest" camp real ammunition. Mortgage interest on a rental property is deductible from rental income: on line 8710 of federal form T776, and among the current expenses recognized by Revenu Québec. Unlike a mortgage on your principal residence, this debt "works" for you at tax time.
That has two consequences. One: paying down debt whose interest is deductible makes you lose that deduction — so the real cost of the debt is lower than the posted rate, making pay-down a little less attractive than it appears. Two: keeping deductible leverage and reinvesting can be defended… provided the reinvestment itself generates income that absorbs the carrying cost. Deductibility doesn't turn a bad deal into a good one; it only makes a good deal better.
The three numbers to calculate before deciding
- Your net mortgage rate after the interest deduction (not the gross rate).
- The realistic net return of a reinvestment — conservative, not optimistic.
- Your remaining cash cushion after the decision (never zero).
🎭 Devil's Advocate
Let's be honest: the "reinvest" camp has real arguments, not straw men. Historically, well-chosen real estate has delivered total returns (cash flow + amortization + appreciation) above a simple 3% net. A disciplined investor, with a good off-market deal and a smartly financed structure, can grow their capital far faster than by paying down 3% net. Leverage, used prudently, is precisely what built most plex portfolios in Quebec.
Another solid point: paying down locks your capital in an illiquid asset. If a rare opportunity comes along, money buried in pay-down isn't available without refinancing — with fees and delays. And for a young investor with a long horizon and a genuine risk tolerance, prioritizing growth over safety is a rational choice, not ego. It's also the spirit of strategies like BRRRR, which rests entirely on redeploying capital. The other camp isn't wrong: it simply has a different risk profile than ours.
The Verdict for a North Shore Plex Owner
Having weighed both camps: in 2026, with rates flat, make the after-tax net rate your dividing line. If your reinvestment doesn't clearly beat your net mortgage rate — say, more than 2 to 3 points of extra net return to compensate for risk and illiquidity — pay down. That certain return, in a context where no one guarantees a rate cut, is hard to beat honestly.
An important nuance: it isn't all or nothing. A North Shore owner can accelerate the pay-down while keeping a cushion, then reinvest only when a deal clearly clears the bar. Discipline means reinvesting on a number, not on the urge to get bigger. And if the math leads you instead to exit a stretched building to free up and reposition your capital, a direct sale is a clean, fast option.
CMHC MLI Select estimatorModel your financing and net rate before you choose between paying down and reinvesting. →