How To Use Registered Funds for a Mortgage
How to Use Registered Funds for a Mortgage
An RRSP is a valuable tool in saving for retirement and offering taxation advantages, but did you know that they also allow for a range of investment assets like real estate? That’s right!! Cornerstone actually worked with Olympia Trust Company this winter to buy a flipping property using an investor's RRSP dollars.
Generally, the funds in an RRSP should stay there until retirement as there are penalties for early withdrawals, however there is an exception to this rule. By using registered funds for a mortgage, one can withdraw from their plan without paying any tax because it stays under the RRSP umbrella; it is a lateral move with no penalties unlike other loans and lines of credit.
The lender and the borrower set and agree to the interest rate and terms of the mortgage, allowing the lender to have more flexibility and control in how they use their money and want it to perform. It is a simple 8-step process to open an account with Olympia Trust Company, create a mortgage and begin receiving interest payments!
If you are interested in using RRSPs to invest in real estate, here are 5 “Fund Facts” to consider:
The lending transaction must be Arms-Length between two or more non-related parties.
The mortgage can be used on any Canadian residential, commercial, industrial or
recreational property.
The allowable loan-to-value amount is 90%.
All interest earned on the RRSP loan must return back to the RRSP account.
One can use RRSPs for both standard mortgages and syndicated mortgages.
Without doubt, using registered funds to invest in real estate offers a range of benefits. Whether you want to learn more about the process or are ready to get started on your real estate investment journey, get in touch with us - our team would love to chat more!
Corrina Nieman
Operations Management
