Did 2012 boost your confidence in investing? If you’re a savvy investor and have the time to monitor your (mortgage) investment on a daily basis, then the strategy of becoming your own mortgage lender could be a sensible option for you. For the majority of the population however, who have neither the time nor the wherewithal, becoming one’s own mortgage lender isn’t practical. Working with an Accredited Mortgage Broker is.
So how do you become your own mortgage lender? Easy! You hold your mortgage inside your RRSP and pay yourself the interest, not the bank. Sounds simple enough, right? That was easy part. Here are a few of the details:
Your RRSP becomes “the bank/lender”. Rather than paying principal and interest to the bank, you would pay principal and interest to your RRSP. By the way,
- there must already be sufficient funds in your RRSP to cover your mortgage
- there are costs involved in setting this up strategy
- you must charge yourself prevailing interest rates
- payments don’t count as tax deductible contributions
- calculating your rate of return can be complicated
While there are advantages to this strategy, there are also disadvantages. Contact me to learn more. If 2012 is your year to renew or refinance your mortgage, talk to an Accredited Mortgage Broker (like me) first!
Have you or someone you know adopted this mortgage strategy? Leave a comment and share your views.
