18 — Wednesday, Octoher 13, 1999 ~ North Shore News icing ye AT first glance it looks ‘tempting: Hold your - Mortgage in your “RRSP and make those | ‘monthly payments to : yourself iastead of an ~ outside lender. : And if you set a high . ‘ mortgage rate, won’t that build up the RRSP even faster? ’ There is no simple answer. . So consider these two guide- lines: How much is your RRSP ~ yielding at present? If the mortgage rate (which miust correspond to current lend- ing rates) would improve: ' our yield, then it could. gage in the RRSP. But if your RRSP js aver- aging 10 per cent a year and the mortgage would yield oniy seven per cent, it makes more sense to pay an outside lender $7 for every $100 borrowed while your RRSP earns $10 for every $100 invested. What happens if your RRSP holds mainly (or only) GICs and bonds in your RRSP earning an average of five per cent, for example, “while the mortgage would _ produce seven per cent? Well... You must pay extra admin- istration and other fees to hold your mortgage in your RRSP, both sctup and ongo- ing charges. This means in the short term, it rarely makes sense financially to fol- low this route, especially if the mortgage is yielding only slightly more than the former investments. Over the longer term, however, a consistently high- er yield produced by the “mortgage should gradually outweigh these extra costs. ; The only way to 9 cif you . north shore news ur own should hold your mortgage in your RRSP is to run the figures, then compare those projections with holding other investments in your plan while borrowing from an outside lender. To hold your mortgage in your RRSP, your plan must have the amount of the mortgage in available or liq- uid funds, which excludes instruments like locked-in GICs. eH KXFPION ea FAX MACHINE © 28-pg out-ol memory | ° Sp auto doc feeder \° * Sore Pa poper cope capacity « cae Bedi If the $150,000 in your RRSP is all tied up in your mortgage, you might have trouble drawing out any of those funds in an emergency. You'd need to switch to another lender — not easy if you were berween jobs, for example. The rules aren’t relaxed just because you hold your own mortgage in your RRSP. In fact, if you don’t make payments, your RRSP — my oo 1 COLOUR "ALL IN-ONE Sb $ Printer, scanner, copier, PC fax” S dec fader” f° Popa cat auio e Video capture capability: Prints & copies 6 ppm 600 dpiscanner, 5 printer ~ POFFICEJET 725 [sotoua lortgag which is a separate fegal enti- ty normally administered by a trust company — could foreclose on you. Mike Grenby is a colimnist and independent personal financial adviser. He'll answer questions in this coltsmn as space aliows but cannot reply personally. Contact him at P.O. Box 50029, Sonta Slope R.P.O., Burnaby, B.C. V5] 5G3; e-mail . fa OFTICEIET Ra Cipanding Komsbalins) N= ‘ MaSIN g letter/legal ‘ © Prinis e3 ppm sl root ; " © Up to 1200 dpi scannar. resolution 'o Copier | reduce/enlarge 24-400%"":: a ° S5-pg how are we doing? When we fall short af your expectation, please teil zs. When a hewspaper story does not seem to seflect fairly what was said, let our editors know. When we ate unable to solve your complaing, we encourage you it wo submit ty che: B.C. Press Council Box 5414 : Victoria, B.C. V8R 684 Tel: (604) 595-2571 Fax: (604} $95-2573 ‘Tae B.C. Press Council was created in 1983 as an independent review board to prxect the public from press inaccuracy of unfairness and promuxe qualizy jourralisra. -