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.
The interest rate you charge yourself must be in line with prevailing market rates. Striving for the highest interest rate possible to generate a better return for your RRSP means you are paying a high rate of interest on your mortgage. Does that make sense?
Figuring out your rate of return on this strategy is not so simple as assuming it is the rate of interest you decide to charge yourself. We've all seen the calculators that show us how, over the life of a mortgage, we can end up shelling out almost as much interest as the original principal, if not more in some cases.
Holding your mortgage inside your RRSP is not for everyone. Being your own bank sounds appealing, but don't forget to perform a bank-like application on yourself - not everyone could be their own best client. Make sure to talk to a qualified adviser about all the advantages and disadvantages.
Read more: Link
www.albertamortgagepros.ca
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