Q&A with Gordon Pape: RRSP Mortgage

A reader wants to use his plan to buy a retirement home in Nova Scotia.

Q — ‪What do you know about RRSP mortgages?‬ Here is the background: I own a home with $170,000 mortgage in Ontario. I also have a $70,000 credit line that I was going to pay off with a cottage I own (value about $65,000). I earn $80,000 a year gross.‬
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‪I am looking at a retirement home in Nova Scotia at $395,000 to also use as a vacation home until retirement in about 10 years. The issue I have is that my combined mortgage will equal $565,000. I would never get approved for a mortgage that high, and even if I were approved the payments would be difficult. Once retired I would sell my existing home, but until then I would be living on Kraft Dinner and wieners.‬
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‪I have $350,000 in RRSP funds. Would a RSP mortgage work for me? Is it an unwise thing to do?‬ – Keith‬ R.

A – Here’s the problem. Even if you could get an RRSP mortgage (very few financial institutions offer them) it would have to be at commercial rates. You’re not allowed to set your own conditions, such as giving yourself a zero interest loan. So if the payments would be difficult on a non-RRSP mortgage, they would be equally as difficult on one held within a plan. You’d still be eating the Kraft Dinner and wieners, I’m afraid. It looks like you’ll have to postpone your idea for a few years.

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