House buyer beware: Landmark B.C. court ruling will shake real-estate industry.

A B.C. Supreme Court ruling will send shock waves through the arm of the Canadian real-estate market that is powered by foreign capital, say immigration lawyers.

The ruling targets a weakness in Canadian laws that often leads foreign owners of real estate in cities such as Metro Vancouver and Toronto to claim they are “residents of Canada for tax purposes” when they are not.

The landmark B.C. decision requires notary public Tony Liu to pay his client more than $600,000 because Liu failed to adequately determine whether the Vancouver house his client was buying for $5.5 million had been owned by a tax resident of Canada.

As a result, the Canada Revenue Agency did not get paid, at the time of the sale, the 25 per cent capital gains tax it charges non-resident sellers of Canadian property on any profit they make on the sale.

So the CRA later demanded the buyer pay the $600,000 in tax. The buyer, in turn, sued Liu, arguing Liu failed to discover the seller was not a tax resident of Canada.

The CRA considers people who don’t live in the country at least six months a year and don’t pay income taxes here to be foreign property investors and speculators and thus subject to capital gains taxes.

Three Canadian immigration lawyers said the CRA tax-residency rule is often not enforced, even in overheated housing markets in Vancouver and Toronto that are in part fuelled by offshore money.

The complex ruling published this month by B.C. Supreme Court Justice Kenneth Affleck strikes to the heart of a gaping hole in Canadian tax, immigration and property-transfer law, say the immigration lawyers.

The B.C. decision is a stark warning to real estate agents, notaries and lawyers who fail to ensure that sellers of properties are truly tax residents of Canada, said David Lesperance, a tax and immigration lawyer based in Toronto.

“This truly is a game changer,” said Vancouver immigration lawyer Richard Kurland.

“It’s a precedent. Real estate agents can now get a knock on the door from the taxman, asking for the (capital gains) taxes that should have been collected by Ottawa, because the agent failed to make adequate inquiries.”

Sam Hyman, a Vancouver immigration lawyer, said the judge’s decision alerts purchasers to “the dire consequences” of making offers on properties sold by people who may be trying to avoid capital gains tax by falsely declaring they are tax residents of Canada.

Many buyers and their agents, Hyman said, are not being diligent in making sure the seller is a physical or tax resident of Canada, while others are being “cavalier” or “engaging in wilful blindness” about it.

The immigration lawyers urged the B.C. government to end the “honour system” that leaves it largely up to sellers to state on real-estate-industry forms whether or not they are residents of Canada for tax purposes.

They said the honour-system loophole could be fixed through Ottawa and Victoria agreeing to the sharing of information among the CRA, the federal Immigration Department and the arm of the B.C. government responsible for property sales.

The B.C. Liberals, Kurland said, have stubbornly refused to solve the costly problem by reforming the government’s property-transfer forms to require sellers to answer whether they are “a tax resident of Canada.”

The B.C. government, which last summer brought in a 15 per cent tax on foreign buyers to cool Metro Vancouver’s globalized real estate market, recently began to ask property sellers and buyers to answer, “What is your citizenship?”

But citizenship is “as irrelevant as eye colour,” Kurland said.

The issue that really matters to most Canadians and the CRA, he said, is tax residency, whether a home buyer or seller pays their fair share of taxes in this country.

All three lawyers say Canada is forgoing hundreds of millions of dollars in tax revenue by not enforcing the country’s tax-residency rules, which are designed in theory to give long-term residents an advantage over foreign nationals.

The lawyers said they hope the federal government – which this week pledged to “target high-risk international tax and abusive tax-avoidance cases” – will make it a priority for CRA to audit mansion owners who pay little or no income taxes.

It would be relatively easy for the CRA, Lesperance said, to conduct “lifestyle audits” on wealthy trans-national “astronauts,” also known as “ghosts,” who pay little or no income tax in Canada while financing family members to spend lavishly on expensive homes and cars in the country.

In some cases, Kurland said, dubious immigration professionals are advising clients they can “eat their cake and have it too.”

Some property owners, for instance, are claiming to real estate officials that they are Canadian residents, so they can avoid capital gains taxes while selling houses (and to ensure they qualify for permanent resident status).

But some of the same people, at the same time, are claiming to the CRA that they are not residents under our tax law, so they don’t have to declare their global income and property holdings, and pay income taxes on them in Canada.

-Calgary Herald

Thinking about buying a home? Here are a few cold, hard facts to chew on

You want to be the king or queen of your own castle. But how do you conquer this daunting feat, given that in big cities, so-called starter castles can cost more than $1-million? To help you navigate one of the largest purchases you’ll ever make in your life, here are some answers to commonly asked questions for first-time home buyers.

How do I know if I’m money-ready to be a home owner?

Look at your lifestyle and ask yourself, “Am I ready to commit?” Do you have stable income and can you plant roots for a few years?

“With the transactional costs of real estate, you have to stay put for five years to make up your money,” says 31-year-old Sean Cooper, who paid off his $450,000 mortgage in three years and authored the upcoming book, Burn Your Mortgage.

Next, crunch some numbers to determine if you can afford the home you want. The Canada Mortgage and Housing Corporation says your monthly housing costs (mortgage payments, taxes, heating, condo fees, etc.) shouldn’t be more than 32 per cent of your gross monthly income. Use mortgage payment calculators. Ask other homeowners how much owning their homes cost. And don’t forget to add in the closing costs.

“A lot of people assume that renting costs the same amount monthly as owning a house but that’s not true,” Cooper says. “Home ownership costs come with a lot more expenses such as home insurance, repairs and maintenance. A good rule of thumb is to budget 1 to 3 per cent of the purchase price of per year to repair and maintenance.”

How the heck do I amass a down payment?

“Beg your mom and dad,” says James Laird, president of Broker of Record. “We’re seeing that family members are willing to help.”

Millennials were 47 per cent more likely than generation Xers to have received help from family for a down payment on their first home, according to a recent RateHub report.

For those who don’t have that option, it’s going to take sacrifice and hustling. See if your parents will allow you to move home temporarily — almost 40 per cent of Millennials have moved back home at some point, a TD survey says — or if you can downgrade your living expenses, for example, by finding a roommate. Do what you can to boost your income and your savings, whether that’s reducing spending or negotiating for a raise or working that side hustle.

Also, under the home buyers’ plan, first-time home buyers can take $25,000 out of their registered retirement savings plan and pay it back over the next 15 years without incurring any penalty. For a couple that means $50,000.

Should I wait and save up 20 per cent or just put down the minimum 5 per cent?

Buyers who put down less than 20 per cent must purchase mortgage default insurance; they also may also qualify to borrow less. So, if you’re in an affordable housing market, aim for 20 per cent. (For the average Canadian home, which costed $474,590 in December, that’s a $94,918 downpayment.)

“If you’re waiting for a 20 per cent downpayment in a big city and you don’t have parental help, you’re going to be waiting a long time,” says Kerri-Lynn McAllister of RateHub. You then run the risk of being priced out of the market if prices continue to rise. “If you’re looking at [waiting] years, then it may not make sense,” McAllister adds. “[The insurance] is not a cost that you often feel because it’s rolled into your mortgage.”

What are my borrowing options?

“Do your research and compare your rates online,” McAllister says. “Even doing that research ahead of time and bringing that number to your bank and asking if they can match it, is also very prudent. You don’t want to take the first offer.”

Shopping can be complicated so consider getting a mortgage broker — an intermediary who is connected to multiple lenders and who shops around for the best deal for you (they are paid a finders fee from the lender), she says.

Vancouver-based online lender Mogo recently unveiled a mortgage platform geared to Millennials; the digital dashboard walks users through the process and allows them to apply for a mortgage online. “The application takes four minutes,” says Chantel Chapman, a credit expert and financial fitness coach with Mogo. “It’s all about the experience with a mortgage specialist and the convenience of doing it online.”

When you’re shopping for a mortgage, don’t just look at rates. Look at the penalties if you end up breaking your mortgage and check out pre-payment privileges such as being able to make lump sum payments, increase your payments and double up on payments.

The house that I want is out of my reach. Now what?

“People have to manage their expectations,” McAllister says. “The dream of home ownership doesn’t have to be equated with a detached house because that can be a stretch in cities like Toronto or Vancouver. People should start looking at different types of homes to fulfill like that dream; town houses and family-friendly condos are good alternatives.” Consider other options such as buying outside of the core or buying with family or friends.

-Financial Post

Teranet-National Bank index: Home prices post record February increase

Canadian home prices posted a record jump for February, fuelled by sales in Toronto, Hamilton and Vancouver, according to a Teranet-National Bank survey.

The national composite house price index showed a 1.0 per cent gain for the month, the largest February increase in the 18-year history of the index.

Toronto soared a record 1.9 per cent, while Hamilton gained 1.4 per cent, also a record increase. Vancouver added 1.4 per cent.

However the story wasn’t the same across the country as seven of the 11 major cities tracked posted declines, with Calgary falling 1.3 per cent.

The Calgary Real Estate Board earlier this month reported the average price of single-family homes sold in Calgary last month rose 2.8 per cent from a year earlier, to $557,061. The median price improved by 5.2 per cent, to $492,000.

Compared with a year earlier, the Teranet-National Bank index was up 13.4 per cent, the largest 12-month increase since 2006.

The year-over-year jump was due to a record 23 per cent increase in Toronto and a 19.7 per cent gain in Hamilton, also a record.

“In order to accurately assess the Canadian home resale market, it is essential to recognize the dichotomy between markets like Toronto, Hamilton and Victoria, where price growth is in the double digits, and other markets where the progression of home prices has been much more moderate, if not negative,” National Bank senior economist Marc Pinsonneault wrote.

Prices in Vancouver, while up in February compared with a year ago, are off their highs set in September as measured by the Teranet-National Bank index. The number of sales in the city has also decreased.

The price index came one day ahead of the latest home sales figures from the Canadian Real Estate Association expected Wednesday.

-Calgary Herald

Millennial households to triple by 2036

The number of millennial households in Canada will more than triple by 2036. Projections range from 5.5 million to 7 million millennial households in 2036, up from 1.7 million in 2011.

This is according to Long-term Household Growth Projections for Millennial Generation, a Research Insight that supplements our Long-term Household Projections — 2015 update. The millennial generation refers to people born between 1981 and 2001.

The report predicts that the number of couples with children will reach 29% of all millennial households by 2036. It also predicts that non-family millennial households of 2 or more people will decrease considerably. According to the report’s projections, 72% of millennial households will own their own homes by 2036.

Source: CMHC (projections) and adapted from Statistics Canada (population projection 2014)

In 2036, an estimated 60% of millennial households will live in single-detached houses, replacing apartments as the most common dwelling type.

Proportion of millennial generation dwellings by type, Canada

Source: CMHC (projections) and adapted from Statistics Canada (population projection 2014)

Credit Card Delinquencies Soar In Canada’s Oil Provinces

Canadians are increasingly putting it on plastic, but those in the recession-riddled oil patch are also increasingly having a hard time paying it off.

Ninety-day credit card delinquencies soared by 23 per cent in Alberta in the fourth quarter of 2016, compared to a year earlier, credit bureau TransUnion said Wednesday. They were up 22.7 per cent in Saskatchewan.

credit card delinquencies

TransUnion had earlier warned that the job slump in some western provinces would result in double-digit increases in credit card delinquencies, “a risk that current data confirm has indeed been realized,” the company said in its report.

A larger number of Canadians are using credit cards, and the total balance on those cards rose 3.3 per cent in the past year, to a total of $94.2 billion in the fourth quarter of 2016.

But the number of credit cards in use in Canada actually declined by some 814,000 over the past year, to 43.4 million cards. TransUnion suggested this has to do with greater customer loyalty to their existing cards.

“Some lenders appear to be increasing credit lines to their customers to capitalize on this loyalty effect,” TransUnion’s VP for product innovation and analytics, Chris Dias, said in a statement.

“We may expect more lenders to evaluate increasing credit lines to cardholders in response to this higher demand.”

non mortgage debt

Overall, TransUnion described Canadians’ non-mortgage debt situation as “sound,” but noted there is a risk of interest rates rising.

“However, this scenario has yet to deter the Canadian consumer, and we believe the far majority of them will be able to weather the impact of these increases,” TransUnion said.

-Huffington Post Canada

Most Chinese buyers want Calgary real estate for own use, review finds

The top reason foreign buyers from China want to get into the Canadian housing market is education, not investment, according to data from a popular global real estate listings website.

Figures released Tuesday by the Chinese website in partnership with Sotheby’s International Realty Canada found schooling was the primary motivation for potential Chinese homebuyers who viewed property listings in major Canadian cities in 2016.

It found housing needed for educational purposes was the most cited reason 46 per cent of Chinese users were looking at properties in Montreal, followed by 44 per cent in Vancouver, 41 per cent in Toronto and nine per cent in Calgary.

The second most common motivator was “own use,” which could mean the home would be used as a second or third property. Sixty-two per cent of those looking for homes in Calgary cited this was their main reason, followed by 37 per cent for Toronto, 25 per cent for Vancouver and 34 per cent for Montreal.

Investment was the top reason listed by a quarter of home seekers, with 27 per cent saying it was the main reason for their property searches in Vancouver and Toronto, 23 per cent in Montreal and 21 per cent in Calgary.

Brad Henderson, president at Sotheby’s International Realty Canada, says the figures show that there have been misconceptions about why Chinese homebuyers look to Canadian real estate.

“I really think a lot of perception that people have around foreign buyers and specifically buyers from mainland China are informed by more anecdotal information and not statistics,” he said.

The data also indicated the majority of Chinese property searches were for Canadian homes priced below $655,050.

“While home buyers from mainland China have been identified as a notable segment of foreign purchases within the luxury property markets of Vancouver and Toronto, data dispels the assumption that Chinese interest is limited to the high-end segment,” said the report.

“Instead, it implies that conventional real estate dominates demand.”

The figures also found the implementation of a 15 per cent foreign-buyers tax last August in Vancouver had a swift impact on the interest of those searching for Canadian properties. says that immediately following the announcement of the tax in July, its listing inquiries for Vancouver plummeted 81 per cent year-over-year and 78 per cent in August year-over-year when the tax came into effect.

It also saw that listing searches increased in other Canadian cities, with property inquiries soaring 1050 per cent and 420 per cent year-over-year in Calgary during August and September.

Even so, Henderson says he anticipates the number of Vancouver searches to pick up again, citing a modest increase in the number of inquiries in the last quarter of 2016 which he attributed to prospective buyers having digested the impact of the foreign-buyers tax.

“So we believe that in 2017, we’ll probably see an increased interest in properties in Vancouver.”

The data also found that Canada ranked third by users as the most popular destination for international homebuying, after the United States and Australia. says the data was compiled over the course of 2016 from its more than two million monthly Chinese visitors.

-Calgary Herald

Canadian housing starts trend upwards in February

Housing starts are now on pace to hit 204,669 units in Canada, whereas January saw them hitting 200,255 units. This trend measure is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts.

This winter has seen Canada’s national housing starts trend upward, supported mostly by increased construction of homes in Ontario. New single-detached home construction in Ontario is reaching levels not seen in the province since July 2008 — offsetting recent slowdowns in British Columbia.

Monthly highlights

  • Condominium starts in the Montréal area increased considerably in February. The hike was mainly due to construction starting on some large real estate projects in the downtown Montréal-Griffintown sector. Activity on the new condominium market therefore remains strong in this zone, as these new units add to the nearly 3,000 units currently under construction.
  • Sherbrooke has seen a rebound in single-detached housing starts in recent months. Lower supply on the resale market and a favourable job market have stimulated demand for new homes. In 2016, employment in Sherbrooke continued to grow, and the year ended with net gains in full-time jobs among people aged 25 – 44. These factors should support housing demand in 2017.
  • In Toronto, low supply in the resale market resulted in demand spilling over into the new home market, particularly for low rise homes. Single-detached home starts were at their highest level for February in more than ten years. The total housing starts trend remained steady in February despite a drop in apartment starts.
  • St. Catharines saw February 2017 housing starts reach the highest level for any February since 1991. A third of starts were townhouses and two-thirds were new singles across the region. This comes on the heels of a strong year for St. Catharines starts, where demand has been driven in large part by the relative affordability of housing compared to neighbouring markets.
  • February saw total housing starts more than double in Winnipeg compared to the same period last year. New construction of multi-family units continued to drive total starts higher, with both purpose built rental and condominium units increasing year-over-year. Single-detached starts were also up by roughly 30% reflecting low inventories of completed and unsold new homes in 2016.
  • Multi-family home construction more than doubled in Edmonton last month from the same period last year. This was unexpected given the near record levels of complete and unsold apartments on the market. The Edmonton apartment inventory has been high since the start of 2016.
  • Housing starts in the Victoria CMA trended upwards in February. In particular, there was a surge in single-detached home starts in the West Shore municipalities. New construction has been supported by low inventories of homes for sale and strong migration to the region.


Canada’s Banks Resist Plan For Them To Take On More Mortgage Risk

Canada’s banking industry association has criticized a federal Liberal proposal that would see them take on more of the risk involved in lending out mortgages.

The Canadian Bankers Association (CBA) said in a submission to the Department of Finance that the proposal would “undermine” access to mortgages for Canadians, by increasing mortgage rates, reducing competition and excluding some people from getting mortgages at all.

The proposal would see mortgage lenders pay a deductible on their insurance when a mortgage defaults. Currently, mortgage insurance covers the full cost of a defaulted mortgage.

That arrangement has some critics worried about “moral hazard”: Since someone else pays when things go wrong, the banks have little incentive to make sure that their insured mortgages have been lent out responsibly.

Many organizations, including the IMF, have suggested that the government phase out or privatize the Canada Mortgage and Housing Corp., the country’s government-run mortgage insurer, in order to reduce risk in the housing market.

But the CBA’s report argues, in essence, that if it ain’t broke, don’t fix it.

“Canada’s housing finance system has demonstrated considerable resilience and stability over time,” the report said, referring to the fact that Canada avoided the U.S.’s housing crash last decade.

“The historical success of Canada’s system creates a strong presumption in favour of existing arrangements.”

The report argues that forcing the banks to take on more of the risk of insured mortgages would make it riskier for lenders, which means they would demand higher mortgage rates.

Additionally, it would mean some regional and smaller lenders, who depend more on insured mortgages, would stop lending, reducing competition.

“The impact would be particularly acute for first-time homebuyers,” the report stated.

Though Canada’s banks have been lauded in recent years for being well-run and well-capitalized, many organizations have less positive things to say about Canadians’ household debt, which has been driven by rising mortgages and is now the highest in the G7, at 166 per cent of disposable income.

The Parliamentary Budget Office warned last year that Canadians risk a debt crisis by 2020 if interest rates were to rise.

The CBA argued in its report that lenders vigorously stress-test their mortgage portfolios to ensure borrowers can still afford their mortgages should mortgage rates go up.

-The Huffington Post Canada

A transition in the making

Detached sales activity boosts February housing market

After the first two months of the year, Calgary’s detached sector continues to drive a slow transition in the housing market. February sales totaled 1,342 units, which is still 19 per cent below long-term averages, but an improvement over the past two years.

As sales kept trending upward, detached inventory levels continued to ease in February. These conditions caused months of supply to fall to 2.4 months, putting less downward pressure on pricing. Unadjusted detached benchmark prices totaled $501,900 in February, which is one per cent lower than prices recorded last year, but slightly higher than January figures.

“There seems to be a new sense of optimism these days,” said CREB® president David P. Brown. “Some sellers are feeling upbeat about the changing landscape and the improved chances of selling their home. Other people are looking at the spring market with caution and wondering if we’re going to see a higher than expected surge of listings. While there’s less product on the market right now, sellers still need to be realistic with their pricing.”

The amount of excess inventory eased in the overall market in February, setting the stage for a transition to a more stable market this year. Months of supply totaled 3.4 months, down from five months over last February. At the same time, the sales-to-new-listings ratio trended from a near record February low of 39 per cent last year to 55 per cent this February.

With sales improving and new listings and inventories contracting—two key measures of market balance, there’s good evidence to show that the housing market has started a trend toward more balanced conditions.

 “The transition in the housing market appears to be underway,” said CREB® chief economist Ann-Marie Lure. “However, it is important to note that this change is primarily being driven by improvements in the detached market and stability in the labour market.”

“It will take some time for these conditions to translate into all housing segments and achieve price recovery,” said Lurie. “But all indicators continue to point toward a slow transition from a contracting market toward one that is stabilizing at lower levels.”


Banks’ dirty little secret: You can hold your mortgage in your RRSP — but is it worth the trouble?

There are a lot of reasons why holding your mortgage in your RRSP is appealing. And there are a lot of people who could be candidates for the strategy. But I am going to let you in on a dirty little secret — the financial industry does not want you to know about holding your mortgage in your RRSP in the first place.

Many investors are still affected by the global financial crisis nearly ten years later. It was the collapse of the subprime mortgage market in the United States in 2007 that began the domino effect. It is hard to believe a decade has passed.

Since then, stock and real estate markets have had a profound emotional impact on investing for Gen Xers and Millennials. Canadians born after the baby boom that ended in 1964 were entering their 40s when the global financial crisis ensued. This is an age when many people are moving into larger, more expensive homes and simultaneously ramping up their retirement savings.

Younger generations of Canadians have therefore experienced a period when rising real estate is taking an ever larger share of their family budget, often at the expense of traditional investing. It has also been a period during which many people have felt that real estate has nowhere to go but up and is the best investment around.

This preference for real estate over stocks is further reinforced by the fear instilled by the 35 per cent drop in Canadian stocks experienced by the Toronto Stock Exchange in 2008. According to a recent poll by Mackenzie Investments, “younger Canadians are significantly more likely to have negative feelings around RRSP season, while those in the 55+ age group appear more positive.”

Younger Canadians certainly have not had the same hesitation regarding real estate and mortgages, continuing to push real estate prices to all-time highs and doing so on the back of more and more debt.

So holding your mortgage in your RRSP can be appealing to younger Canadians, as well as anyone looking for higher yielding investments in a low yield world.

If someone wants to hold their mortgage in their RRSP, the first step is to find an institution that will allow you to do so. Your RRSP with your investment adviser or your bank is likely not an option. You will need a self-directed RRSP from an institution like Olympia Trust, B2B Bank, Canadian Western Trust or a handful of other trust companies or banks.

You will have to undergo the same income verification requirements and approval processes as you would with a regular mortgage. So holding your mortgage in your RRSP is not a way to borrow more money than you would otherwise be able to borrow conventionally.

The applicable interest rate will be the posted rate — not the discounted rate that most of us are accustomed to paying. This means more interest on your mortgage payments, but that is offset by high interest income for your RRSP.

There are fees involved, including appraisal fees, administrative charges, self-directed RRSP fees, mortgage insurance and so on. Set-up fees could be a couple of thousand dollars and ongoing costs could be a couple of hundred dollars each year.

Once set up, you make regular payments to your RRSP the same way you would otherwise do to the bank. The mortgage payments accumulate in cash in your RRSP and can then be invested into other investments. The principal and interest calculations are the same as with any regular mortgage.

Of note is that payments are not considered RRSP contributions. And just like your regular mortgage, you cannot miss payments. It does not matter that you are both the lender and the borrower. The trustee that holds your mortgage is responsible for initiating foreclosure if you do not keep up.

Much of the advice I have come across about holding your mortgage in your RRSP suggests that you need to have a large RRSP or a small mortgage to consider the strategy. That is not true, as the Canada Revenue Agency (CRA) states that “there is no income tax requirement that such mortgages be a first mortgage or (even) a residential mortgage.”

On that basis, you can hold a portion of your overall mortgage debt on a property in your RRSP and another portion as a regular mortgage with a conventional lender. That said, the cost and time to set up a small mortgage in your RRSP may not be worth it.

It is also interesting to note that the CRA does not prevent you from holding a commercial property mortgage in your RRSP or even a rental property mortgage. These mortgages would be even more appealing mortgages to hold in your RRSP because if you are using these properties to earn rental income, the interest you are paying — to yourself in your RRSP — is tax deductible on your personal tax return. Furthermore, the interest rate on these mortgages may be higher than the interest rate on a residential 1st mortgage, meaning higher income for your RRSP and higher tax deductions for you personally.

So back to my comment about the financial industry not wanting you to know about holding your mortgage in your RRSP. Most industries — the financial industry perhaps more than any other — have biases. We live in a capitalist society and the financial industry benefits when you borrow your mortgage money from them and invest your RRSP money with them as well. It gives them two sources of profit, as opposed to you cutting them out and holding your mortgage in your RRSP.

But this is a great case of what sounds like a great way to stick it to the establishment that sounds good in theory, but probably is not good in practice.

Consider this: if you hold your mortgage in your RRSP, you might be borrowing at 5 per cent and investing at 5 per cent (the posted rate). But if you can instead get a regular mortgage, borrow at 2.5 per cent and ideally invest at 3 per cent, 5 per cent, or even 7 per cent, you are going to be much better off in the long run because you will make money on the spread.

On that basis, despite the appeal and despite the large number of Canadians who could hold their mortgage in their RRSP — I would think twice.

Despite the large number of Canadians who could hold their mortgage in their RRSP — I would think twice

Those most likely to benefit would be ultra-conservative investors who are unlikely to take on stock market risk. Someone with a tax-deductible mortgage on a rental property, especially if they are in a high tax bracket, is another potential candidate.

But I would generally shy away from the strategy and instead use the bank as your partner instead of your enemy. Take their cheap money as a mortgage and do your best to invest your RRSP in a diversified portfolio.

If you really want to hold a mortgage in your RRSP, I would rather see you own someone else’s mortgage and ideally as a diversified pool of mortgages like a Mortgage Investment Corporation (MIC). Better yet, consider a diversified mix of stocks and bonds at a reasonable fee that are suited to your personal risk tolerance.

-Calgary Herald