How To Use Arms Length RRSP Mortgages To Finance Real Estate

Author: Paul Blacquiere
Category: Real Estate
Reading time: min

Finance Property Without The Banks

canadian-moneyHave you ever been turned down for a mortgage?

Have you ever run out of down payment funds to buy property?

There is a solution… and it can be found in other people’s RRSP accounts.

Most people have heard of RRSPs (Registered Retirement Savings Plans) and some may have heard of RRIFs (Registered Retirement Income Funds) or LIRAs (Locked In Retirement Accounts).

These are retirement accounts offered by financial institutions and in which Canada Revenue Agency (CRA) allows deposits to be tax deductible and to compound tax free while they are in the account.  Millions of Canadians have taken advantage of these accounts to save for their own retirement, and there are billions of dollars being invested in them, not to mentioned billions more in unused contributions room.

What you may not know is that these RRSP funds can be invested in mortgages on real property in Canada, and still stay tax sheltered.  This is called an Arm’s Length Mortgage or RRSP Mortgage.

CRA allows a wide range of investments to be held within registered retirement accounts (for the latest CRA document, please search Google for ‘CRA qualified investments’).  Most people are familiar with holding stocks or mutual funds within their RRSPs. Few people realize that investments may also include:

  • Bonds and Debentures
  • Term deposits and Guaranteed Income Certificates (GICs)
  • Equity linked notes
  • Rights and warrants
  • Covered calls, long calls and puts, and LEAPS
  • Gold and silver certificates
  • And mortgages secured by real property

Many of the above investments can only be held within a special type of retirement account called a self-directed account. This allows the account holder to have much greater control over investment selection and decisions.


No Applications or Qualifying Needed, Not Even A Job

How does this benefit you as an investor?  You can borrow the money from people’s retirement accounts in the form of a mortgage secured against a property you own or will own.  This can be done using a mortgage broker, or you can do it yourself if you know how.

Borrowing other people’s RRSP money is the same as dealing with a private lender and there are many benefits to borrowing from these individuals, including:

  • No application forms
  • No job verification
  • No qualifying
  • No appraisal, fire retrofit, etc.
  • No down payment verification
  • Down payment funds can be borrowed
  • Financing available up to 100%
  • Potentially lower interest rates than through a mortgage broker
  • No mortgage broker fees
  • Low setup fees


2 Types of RRSP Mortgages, Different Rules

There are two types of mortgages that can be held within retirement accounts such as RRSPs and RRIFs:

  • Arms length
  • Non-arms length

The term arms length is used by CRA and refers to how closely or distant the borrower / property owner and the lender are in relation to each other.

For example, for a borrower, the following people are considered:

  • Non-arms length – brother, sister, parents, spouse (either common law or by marriage), your own children (including adopted)
  • Arms length – friends, strangers, uncles, aunts, cousins

This means that for a mortgage to be classified by CRA as arms length, an individual could borrow mortgage funds from the RRSPs of their friends, strangers, uncles, aunts, and cousins, but not a brother, sister, parent, spouse or child.

For a detailed description of CRA’s definition of arms length, please search Google for ‘CRA arm’s length definition’.


Trustee Required To Set Things Up

All investments within retirement accounts, including arms-length mortgages, must be managed by financial institutions.  For RRSP Mortgages, the financial institution acts as a trustee for the account holder and manages the mortgage on the private lenders behalf.

For example:

  • Jane has a self-directed RRSP account with financial institution XYZ
  • Joe wants to borrow her RRSP money in the form of a mortgage
  • Jane’s financial institution acts as her trustee for the transaction

Private RRSP Mortgage lenders are an excellent way to finance a property with little to no hassle, and with terms and conditions favourable to the borrower.  Anyone who doesn’t want to deal with banks should consider using them to finance property.


Many Ways To Use RRSP Mortgages

The following list is a brief overview of some ways RRSP Mortgages can be used to finance property:

  • Buying property – reduce or eliminate the need for bank financing, as a substitute for a down payment, mortgage insurance, or a joint venture partner
  • Refinancing – pay for renovations, buy more property, buy out any partners
  • Selling property – make your property easy for people to buy with no qualifying mortgages

As with any mortgage financing, great care must be taken to ensure the investor can afford to make the payments, as well as repay the original amount borrowed at the end of the term.

In addition, investors should also know:

  • exactly how mortgages work
  • how to structure RRSP Mortgages to their advantage
  • what to do when the mortgage term has ended, and
  • exactly how to fill out the trustee paperwork

If you’re interested in learning more about RRSP Mortgages, check out my home study course with step-by-step detailed instructions on how to do all of the above and more.

Creative Financing Using
RRSP Mortgages

Discover how to use other people’s
to finance real estate.

>> CLICK HERE to learn more <<


Frequently Asked Questions


“I have been contemplating taking your Creative Financing Using RRSP Mortgages course… I have a quick question for you that I’m wondering if you could help me with.  Is it possible to go the traditional financing route but use someone else’s RRSP money for the down-payment?

For example, buy a property for $200K:

  • 80% mortgage from the bank = $160K
  • 20% down-payment consisting of:
    • 15% RRSP investment from 3rd party to be on title = $30K
    • 5% cash investment by me = $10K

Any advice, would be greatly appreciated.”

Greg from Ottawa, Ontario



This scenario is possible, but you’ll likely have to close with 20% cash resources first and then go back and add the 2nd mortgage shortly after closing.  This is because most 1st mortgage lenders want to see you have equity in the deal.

Just be careful you don’t get a collateral mortgage from the big banks, which may place a full 100% charge against the property even though they are only lending you 80% LTV.

In addition, one of the trustees I recommend in the course will not go above 90%, so you will have to use one of the remaining two.



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?


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 mortgage 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.


Creative Financing Using
RRSP Mortgages

Discover how to use other people’s
to finance real estate.

>> CLICK HERE to learn more <<


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