Should you be someone else’s mortgage lender?

PREET BANERJEE

Tuesday October 12, 2010

Last week we discussed the concept of holding your own mortgage inside your RRSP. This week we’ll take a look at holding someone else’s mortgage as an investment in general (which can be inside or outside your RRSP).

While holding your own mortgage inside your RRSP is a non-arm’s length transaction subject to CMHC insurance premiums, holding someone else’s mortgage can be an arm’s length transaction and potentially not subject to these premiums.

Should you be your own mortgage lender?

PREET BANERJEE

Tuesday October 5, 2010

Wouldn’t you like to take your monthly mortgage payment and give it to yourself instead of the bank? Sounds too good to be true? It depends…

Instead of paying principal and interest to a bank, you could pay that principal and interest to your RRSP. In effect, your RRSP becomes “the bank.” That means there must be enough money already in your RRSP that can be lent to you in the form of a mortgage (secured by your house), and you would have to make the repayments to your RRSP over time.