Registered Retirement Savings Plan (RRSP) mortgages, the supposed Holy Grail of private lending. I hear it all the time. Borrowers of all stripes believe there is a vast pot of money held in RRSP accounts just waiting to be lent to them. And, to some extent, that’s true. There are lots of folks with lots of RRSP money tucked away. Maybe you’ve thought about leveraging your RRSP to become a lender yourself.
But, like everything else run by the government, there are rules to follow if you want to lend your RRSP money as a mortgage.
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A Sleeping Bear with a Big Bite.
As a real estate lawyer, I was happy to have one of my favourite realtors send me a new deal where I would be the seller’s lawyer. The first sign of trouble was a big add-on clause that confirmed the sellers were non-residents of Canada. “Uh-oh, could be trouble,” was my first reaction. Then I thought, “if the contract is making a special note that the sellers are non-residents, maybe they have the non-resident tax thing under control…?” When I chatted with the sellers and asked the question, no such luck. They knew nothing about any Canadian tax they might have to pay as non-residents and, in fact, had done nothing about tax of any kind in the 12 years they had owned the property. Now I’m really concerned and here’s why. Continue reading →