You then set up a plan to pay back your RRSP over the next 25 years. And here is the best part - you pay interest on the RRSP Mortgage to yourself - not the bank.
For example, if you set up a 10 year RRSP mortgage ammortized over 25 years you can be paying yourself 8% interest - back into your RRSP. If you invest the monthly payments into a GIC at 4% - It's like making 12% compounded interest on your RRSP.
This type of Mortgage can only be set up through a Self-Directed Plan such as with TDWaterhouse.
There are legal fees (about $600) to discharge your current mortgage as well as CMHC Insurance on the new RRSP Mortgage.(minimal) + an annual plan fee of $200. But if you consider what you are saving on monthly interest payments to the Bank (ie:6% x $100,000 = $6,000/yr) You are way ahead.
This concept works especially well when your mortgage is over $100,000 and you have 25 years before you will need your RRSP.
Of course you "could" do better (or worse) in the Stock Market - but where can you earn 12% on a $100,000 investment without any risk. All Interest payments go to you rather than the Bank. The RRSP Mortgage is a well kept Secret. And now you know why....
