Someone has implemented it. It went well.
It doesn't have to be as complicated as your approach, although I don't see any issue with your idea.
Here are a few points:
- It's expensive so you want to look at it as a long term investment. If you subtract the $1000, or so, of up front expense, you'll find that your break even, as compared to GICs or bonds, is a long way out.
- It's a guaranteed, fixed income, vehicle and it pays better than most others. There are corporate bonds which pay more than a mortgage but those bonds don't give you real estate if they default.
- You will have nice cashflow into your RRSP. Learn to invest that cashflow wisely. Continuous investment over a long period, such as mortgage payments, is a great way to do well but I recommend you start learning the ways of value investing so you can put the cashflow to best use.
- You can switch to a mortgage carried by the bank at any time but there is considerable overhead in making the switch. Don't take that switch lightly but you can make the switch in future, if you discover a better way to make financial gains.
- Don't jack up the interest rate, thinking you will build up your RRSP. You will pay tax when you withdraw from your RRSP/RRIF. Just take the rate you would take if you were negotiating a retail loan. In fact, I look at my RRSP as cheap money which creates cashflow and equity that comes outside the RRSP so it's a nice tax mitigation mechanism if you can put the money to use on a productive asset.
- While you can deduct the RRSP mortgage, and this is great, you can also deduct a 3rd party mortgage so this isn't an advantage.
The RRSP mortgage is a tool that has a very specific and quite narrow application. I'm certainly not interested in talking you out of it, nor am I interested in encouraging it. It has worked out extremely well for us in the past but is no longer financially interesting to us.
In the mid 2000s, I was discouraged with the markets and went entirely into mortgages and GIC ladders in our RRSPs. Suffice to say, we made out extremely well as we took zero impact in the crash of 2009 due to simple luck. I picked up a some extreme dividend REITs in 2009, when nobody seemed to want REITs, and heavily pumped up those positions until 2011. Those have been amazing positions that are still the core of our portfolio but we are still mostly real estate so, like all real estate investors, we didn't get rich quickly.
The lesson:
We have made out extremely well and I'm pleased with everything we've done, however, an objective value investor could have been 100% in the markets, navigated the crash, taken the hit, and still ended up pretty well off. At the time, I couldn't have navigated the crash so it was the correct choice for us. I really wanted the security.
To get back to value investing, think about how you're going to exit real estate investing. Not many consider this. At some point, you're going to stop buying property and the cashflow is probably going to build up quickly. Even worse, when you start the sell-down, you're going to have a lot of money to manage. Sooner or later, you're going to need to have a mechanism to competently manage the fruit of the years of troubleshooting rental problems.
In short, if an RRSP mortgage isn't the obvious best path forward, I'd pass on it. If it is the best path forward, consider Canadian Western Bank. They're no cheaper but CWB offers both arms length and non-arms length RRSP mortgages. The down side of CWB is, when I checked, they didn't have a mechanism that would allow cashflow to go directly into the markets. It's extremely likely they have connected those dots by now. Keep in mind, TD is extremely grumpy about RRSP mortgages. I don't know about the other banks. You'll have to do your own research, of course.