Difference Between Home Buyer’s Plan and RRSP Mortgages

Question

I already know how to use my RRSP money with the Home Buyer’s Plan to buy my own property. Why do I need to know about RRSP mortgages and your RRSP course?

Answer

There are actually 3 different ways to use RRSP money to invest in property. Each one is used in a different way:

  1. Home Buyer’s Plan – you borrow from your own RRSP to buy your first home, withdrawals must be repaid over no more than 15 years
  2. Non-Arms Length Mortgage – you borrow from your own RRSP or that of a family member, money is borrowed in the form of a mortgage and must be insured by CMHC, you must qualify through a bank, as you do with a normal mortgage (CMHC’s guidelines)
  3. Arms Length Mortgage – you borrow from someone else’s RRSP (must be unrelated), money is borrowed in the form of a mortgage, no insurance or qualification is required

As you can see, each method is quite different.  I recommend everyone take advantage of the Home Buyer’s Plan to help buy their first home – it’s a great program.

An Arms Length Mortgage is the most flexible way to use RRSP money, with very few rules compared to Non-Arms Length Mortgages.  I teach exactly how to use these types of mortgages in my RRSP Mortgages course.

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Paul Blacquiere

Founder and Editor at Spirepoint Wealth
Paul is an entrepreneur, investor, speaker, educator and publisher. He is founder and editor at Spirepoint Wealth, a financial education company dedicated to helping people improve their finances, create more cash flow and build long-term wealth.
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  • Patrick says:

    Hi,

    Is it possible that my friend and I makes a kind of a RRSP exchange? So I can buy a condo with his RRSP and for him, do the samething with my RRSP.

    Considering we are in the situation of Arms Length Mortage(unrelated)

    Thank you

    • Paul Blacquiere says:

      Hi Patrick,

      Yes, you are considered ‘arms length’ from each other, and so technically it’s possible

      However, I recommend you find a third person to do it with, just in case CRA questions the motives behind the transactions.

      So for example, you loan yours to friend A, friend A loans their to friend B, and friend B loans theirs to you. I hope this makes sense.

      You could also try spacing out the transaction so they don’t occur at the same time… wait a few months.

      Paul


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