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I'm told that the only requirement for obtaining an RRSP mortgage loan, is having the mortgage insured by a recognized mortgage insurer - and that the insurers can sometimes be negotiated with, with regard to what exactly the mortgage loan will be used for (so, technically, it doesn't need to be used to pay off a mortgage or buy a house).

Is this correct? If so, is it possible to obtain an RRSP mortgage loan for the purposes of paying off, say, a credit line?

[please provide references to back up any factual claims]

  • This is an RRSP mortgage: theglobeandmail.com/globe-investor/personal-finance/… I'm not sure how a loan factors in, could you clarify? – ChrisInEdmonton Jul 6 '14 at 13:05
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    essentially your RRSP lends you personally (or perhaps someone you know well) the money. That's an investment for the RRSP so it earns the interest you charge yourself. Meanwhile you essentially took money out of your RRSP tax free to spend on house, and whatever interest you personally pay on the mortgage, you are happy because it's going to your RRSP. Remember in Canada mortage interest is not tax deductible. – Kate Gregory Jul 6 '14 at 15:35
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Short answer: Probably not. It would cost too much to administer the mortgage. It would be easier to increase your existing mortgage with a financial institution and role your line of credit into the mortgage.

The exception: If you own a home that has a mortgage with less than 75% of the value of the home left on it and you have an RRSP with more than $30,000 this might be an option.

In theory getting a mortgage from your RRSP might sound like a good idea and technically you can take out a mortgage from your RRSP on a house you are going to buy or on a house you already own. However, the fees associated with administering a self directed RRSP with a mortgage (100-300/year), and the mortgage default insurance (mandatory if you are lending to yourself and ranging from .5 to 2% annually) usually outweigh the benefits gained.

The break even point of taking out an RRSP mortgage is around 30,000$, the mortgage must be administered by a trustee approved under the National Housing Act (TD Waterhouse, Canadian Western Trust, ect), and must be held in a self directed RRSP. These qualifications make RRSP mortgages useful only in very specific situations.

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