Mortgage Refinancing: Looking at the RRSP Scenario - Mortgage Guys
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Mortgage Refinancing: Looking at the RRSP Scenario

The young, the old and the Millennials

Since the 2008 financial calamity of the stock and real estate markets there has been an emotional awareness related to investing in these segments for various age-groups of Canadians. The population born before the end of the “baby boom” in 1964 was into their roaring forties during the global financial crisis.  It’s generally regarded as the age when many are considering mortgage refinancing and investing in larger, more expensive homes; at the same time, attempting to increase their retirement savings potential.

Accordingly, these Canadians have experienced living in an environment in which a significant portion of their budget is spent on real estate. This has also influenced the question of refinancing their mortgages resulting in the forsaking of traditional investments. At the same time, many Canadians have been convinced that the only way for the real estate market to go, is skywards!

The RRSP appeal

Reports indicate that the younger generations of Canadians are significantly likely to have negative feelings regarding Registered Retirement Savings Plan (RRSP) around the RRSP season but the 55 years-plus age have a more positive outlook. This has been seen in a period of real estate prices reaching all-time highs, arguably, riding on the back of an increasing debt factor. It could be seen as a motivation for refinancing by homeowners of their mortgages.

Looking at the RRSP scenario, it could be seen as a positive step to attach your mortgage to your RRSP, not only for younger Canadians but anyone seeking a higher yield investment, in a low yield environment. If you are considering holding your mortgage in your RRSP, an institution must be approached that will allow you this facility! Unlike the refinancing of a mortgage, lodging your RRSP with your bank or investment adviser or bank is not a probable option. Your approach should be directed towards the various trust companies or appropriate banking institutions.

RRSP – mortgage process

It will be necessary for you to undergo similar income verification requirements and approval procedures as with a regular or mortgage refinancing application. Accordingly, it must be kept in mind that holding your mortgage in your RRSP is not a means of borrowing extra finance than you would be able to borrow from traditional sources.

The interest rate will be the posted rate one, not a generally applied discounted rate, such as with refinancing a mortgage. Therefore, your mortgage payments will attract further interest, which will, however, be offset by a relatively high-interest income for your RRSP.