Cottage mortgage in RRSP

Q –  I am looking for a self-directed RRSP plan where a mortgage for a cottage can operate from. Banks appear to not have such a plan. – R.H.

A – There is no legal reason why a cottage mortgage cannot be held in an RRSP. The problem is an administrative one. Mortgages on vacation properties are always more difficult to obtain than those on a principal residence, and the amount of money a lender is prepared to put up is usually less as well. There are a number of reasons for this, but the bottom line is that the risk level is perceived as being greater.

The company administrating a self-directed RRSP can set rules for what can go into the plan that may be different from those of the Canada Customs and Revenue Agency (as long as they don’t violate the law, of course). So while a financial institution may allow a principal residence first or second mortgage to be held in the RRSPs it administers, it may not allow a vacation property mortgage to be included.

I have never done a survey to determine if any self?directed plans exist that allow such a mortgage, nor do I know of any. You would have to contt each individual bank to determine their policies in this regards. – G.P.