Q&A: Use RRSP to pay mortgage?

Question: Can an RRSP be used to pay off the outstanding mortgage on a home and,
to offset the tax implications, transfer the home, as it were, back into the RRSP?
– L.W, Calgary

Gordon Pape answers: Definitely not. What you are suggesting
is a form of asset swap. It could work if you were dealing with securities but
not with your home.

There are two rules that make this impossible. First, the money would have
to come out of the RRSP to pay the mortgage, which means it would be treated
as income and taxed at your marginal rate. I doubt that would be acceptable.

Second, RRSPs may not own real estate directly, which is what you are proposing

Your RRSP could hold the mortgage on your house, although the expense involved
in setting up this kind of program is very high. But that’s as far as
you can go.

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