Friday, March 18, 2011

What is the best strategy to Pay off your Mortgage ? What about that RRSP ?

One of the best strategies for paying off your mortgage quickly is to increase your Mortgage Payments as well as the frequency of payments, ie: bi-weekly rather than monthly. If you can max out your Mortgage Payments and also make lump sum payments to the Mortgage (without penalties) you can pay it off in about half the time. Only problem is where do you get all that extra cash for extra payments ? Is there anywhere you have a big chunk of money just sitting there ? Well, maybe. How about that RRSP ? .... but you can't access that until you retire ?

A few years ago I went into the nearest TD Branch and asked that question. Reluctantly the Mortgage Specialist told me of a way I could access my RRSP funds to pay off my Mortgage completely, without penalty, and pay myself the Interest rather than the bank. It's called a Self-Directed RRSP-Mortgage. Since I had an amount equal to my Mortgage sitting in my RRSP (and losing money in Mutual Funds) I decided to do some research and see if this could really work. There were some costs involved. I needed a Lawyer to help me with the Discharge of the existing Mortgage and set up a new RRSP-Mortgage that I would pay back (TO MYSELF) over the next 20 years. I set the terms of this RRSP Mortgage so that I would be paying back the Principal plus 8% Interest to MYSELF, and not the bank. I was also able to reduce the monthly payments (To MYSELF) so that I would have more cash on hand. This maximizes the amount I'll have in my RRSP at the end of the 20 year Payment Term. Luckily I did this before the Market crash in 2008 and made better use of my RRSP Savings. You can learn more about this from TDCanadaTrust.ca
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12 comments:

  1. Miami Title CompanyApril 30, 2011 at 2:26 AM

    Thank you for nice information.Pay off your mortgage first and then contribute to an RRSP. With this strategy, you get a guaranteed after-tax return through your mortgage interest savings, which is important to many conservative investors.

    ReplyDelete
  2. Maggie LoweJune 17, 2011 at 12:39 AM

    There is one of the best strategy for paying off our mortgage quickly is to increase our Mortgage Payments.We can reduce monthly payment and have more cash on hand.Thanks for sharing information with us..........
    Mortgage Brokers Toronto

    ReplyDelete
  3. AnonymousFebruary 13, 2012 at 6:30 AM

    Thanks for the great summary.

    Do you have a breakdown of the costs involved to do this? I believe there is an ongoing fee for this service. Is it as a percentage of the mortgage? I had inquired back a few years ago and was told that the ongoing costs were significant, so I would like your opinion.

    ReplyDelete
    Replies
    1. RRSP-Mortgage.comApril 30, 2013 at 9:28 AM

      The cost is $200/year + Lawyers fee to discharge the Original Mortgage (we paid $400)

      Delete
  4. RHAugust 13, 2012 at 6:28 PM

    Hi, Nice post! Would you please consider adding a link to my website on your page. Please email me back.

    Thanks!

    Harry
    harry.roger10@gmail.com

    ReplyDelete
    Replies
    1. RRSP-Mortgage.comApril 30, 2013 at 9:27 AM

      Yes, We are running Ads on this page for $50/mo ... I'll send you an email.

      Delete
  5. Vision Investment PropertiesSeptember 1, 2012 at 8:56 PM

    Thank you for spreading the news about this. We've been advising our clients about this for a while, but many Canadians don't understand that this option exists. And it's truly beneficial if you have the funds in your RRSP to cover the total of your mortgage debt because you can use the money you save monthly to purchase an income property for even more positive monthly cash flow.

    ReplyDelete
    Replies
    1. RRSP-Mortgage.comApril 30, 2013 at 9:26 AM

      Yes, We are running Ads on this page for $50/mo ... I'll send you an email

      Delete
  6. AnonymousApril 14, 2013 at 9:53 AM

    The most interesting part of this strategy is that the if you get into muddy financial waters and can not afford to pay into your rrsp mortgage, the mortgage défauts to you self, that is if the house is sold to cover the mortgage default, the the proceeds go to YOUR rrsp. And apparently fro. I some fees the interest is padding your RRSP not the baks profit. I

    ReplyDelete
    Replies
    1. AnonymousApril 30, 2013 at 9:21 AM

      Wow - Is that True ? Sounds too good to be True.

      Delete
  7. LisaApril 30, 2013 at 9:20 AM

    EXCELLENT. This knowledge must be shared !!!!

    ReplyDelete
  8. albina N muroMay 4, 2013 at 2:20 AM

    There's more than one way to pay off your mortgage early. ... If you aren't expecting to see your income increase anytime soon, this strategy might not be the best. mortgage overpayment calculator

    ReplyDelete

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