Using RRSP Mortgages To Invest – Part 1

Have 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.

Almost everyone has 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 (refer to interpretation bulletin # IT-320R3 at http://www.cra-arc.gc.ca for details. 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.

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

In Part 2 of this article, I’ll discuss more detail on RRSP Mortgages and how to use them in your investing.

Note: This article is a brief overview of RRSP Mortgage financing and is not intended as legal or financial advice. Please consult a qualified professional before making any investing or financial decisions.

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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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  • Great article Paul! Definitely a great way for folks to get more out of their RRSPs.

  • David Lowe says:

    Great article. Looking to educate myself on this. Are available to discuss?


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