Self-directed mortgages let you skip the bank and act as the lender—but they’re not for casual investors. Got cash parked in an RRSP or IRA earning next to nothing? You can lend it out, collect interest, and diversify your portfolio. Just don’t forget: you’re now the bank. Price risk like one.
Quick Fix Summary: To set up a self-directed mortgage in a registered account (RRSP, RRIF, TFSA, or IRA), confirm your account allows private lending, find an arm’s-length borrower, draft a promissory note and mortgage agreement, register the loan, and set up automatic payments. Always follow CRA, IRS, or provincial rules—fees and taxes can erase the benefit if you cut corners.
What exactly goes on inside a self-directed mortgage?
It’s just a private loan from your registered savings to a property buyer. Instead of the bank pocketing the interest, you do—right into your RRSP, RRIF, TFSA, or IRA. The borrower signs a promissory note (their IOU) and a mortgage (the lien on the property). You lock in a fixed return; they get financing. As of 2026, Canada Revenue Agency (CRA) and IRS rules still require the loan to be at arm’s length—no sweetheart deals with family or business partners unless you’ve got documented market evidence to back the rate.
How do you actually set one up in Canada (RRSP/RRIF/TFSA)?
- Check if your account allows it
Log in to your self-directed RRSP/RRIF/TFSA. Look under “Permitted Investments” for “Mortgages” or “Private Loans.” If the menu says “No,” call your administrator—some plans flat-out ban real-estate lending.
CRA – What your RRSP can hold - Find a borrower outside your circle
The borrower can’t be your spouse, child, parent, or a business partner you control. Use a realtor or lawyer to source deals beyond your inner circle. - Negotiate the rate and terms
Aim for 4–6 % in 2026 (better than GICs, cheaper than unsecured loans). Get it in writing—handshakes don’t count.
Bank of Canada – 5-Year Bond Yield - Draft the paperwork
Download a template promissory note and mortgage from Canadian Bar Association. Fill in: loan amount, interest rate, payment schedule, default clauses. Have a real-estate lawyer review it before anyone signs. - Set up automatic payments
Arrange pre-authorized payments from the borrower’s account into your registered plan. Most administrators (e.g., Questwealth, Fidelity) provide a “direct deposit” form for the borrower to fill out. Keep every receipt on file. - File the right CRA forms
Within 30 days of funding, submit CRA Form T106 if the loan is to a non-resident or if the interest is paid to a non-Canadian. For Canadian borrowers, annual T5 slips report interest income.
CRA – Mortgages in RRSPs
