RRSP season brings out the best and the worst in clients. Many have old questions; wondering if they should top up their RRSP or instead put the money towards their mortgage, save for a down payment on a house or pay more to their children’s education funds. In the current interest rate environment, others could be weighing more “unique” investment opportunities.

Given Canada’s ongoing housing boom, many clients might be saving money outside of their RRSPs, in anticipation of the moment when they too jump on the real estate bandwagon to lock in before interest rates rise again.

First time homebuyers have a unique opportunity to use that money more efficiently by making an RRSP contribution with the lump sum they intend to use for a down payment, then withdrawing the money after the 90 day waiting period under the Home Buyers’ Plan and combining those funds with their tax return moneys to make an even larger down payment.

First-time home buyers are not the only ones considering RRSP and mortgage concepts. With interest rates rising, those with larger registered plans might be considering alternatives like holding mortgages inside their self-directed RRSPs. For the most part the strategy hasn’t been popular in recent years since the low interest rates have considerably limited returns on this type of investment. With more favorable conditions however, clients holding mortgages in their RRSP can reasonably predict the rate of return those assets would earn, as long as they can afford to make payments. The strategy, though, is not without a significant number or rules, risks and fees.

Linda Renaud is an Accredited Mortgage Professional (AMP) with Invis and can be reached in Kelowna at 878-6706 or via e-mail at lindarenaud@invis.ca at any time to discuss your mortgage financing.

*OAC, E&OE