Wrap your head around this: You're allowed to finance your own mortgage inside your own RRSP.

Sweet, you say? After all, if the banks are so happy about lending you money for your house, why shouldn't you be happy about doing it yourself, with tax-deferred money to boot. Of course, someone did say once that a sure way to get a stupid lawyer is to represent yourself. Might that apply to banking too?

Such leeriness may partly explain why so few people take advantage of having their RRSP hold their mortgage.

Abby Kassar says the decision to adopt this option comes down to one simple calculation, ultimately: "If your expected rate of return is higher (than current mortgage rates), then you are better off not to go with a mortgage inside your RRSP," she said in a phone interview. Kassar is a senior financial planning consultant with RBC Investments. Holding your own mortgage inside your RRSP "is not usually as beneficial in the periods where there is a low mortgage interest rate," she said.

So a decision to self-finance a mortgage really comes down to how pessimistic you might be about other ways of making money.

"All in all, over the last several years, we've seen not much call for it," said Jeff Greenberg, VP of advisory support, also of RBC Investments. "In fact, it only appears when there is an article in the national press. Then we'll get a little blip."

As usual with anything regulated by the government, taking advantage of this option is not simply a matter of paying off your mortgage with RRSPs and calling it even. There are checks, balances and regulations - the details - where the devil tends to hide.

I'm going to stick my neck out and risk oversimplifying the whole issue by briefly summarizing some of the pros and cons to holding your own mortgage under your RRSP umbrella.

There's no way I'm going to suggest that any one person adopt a particular financial strategy. My only goal is to encourage people to consider options.

One of the rules of thumb some of the investment pros I talked to told me is that the calculations only really start to make sense when there is more than $60,000 left on a mortgage and at least that in the RRSP.

And if you have that kind of cash to throw around, you could do well for yourself in a large fund that requires a minimum investment. That's why one of the disadvantages of self-financing your mortgage is what economists call "opportunity costs.”

In English that means: What else could you have done with that money?

Michael Chapman, a financial adviser with DeJong's Financial Services Ltd., was the first person to introduce me to this self-mortgage. He emphasized being "on the right side of the spread" between safe investments such as bonds and safe loan rates.

Still, it's a stupid idea to liquidate investments that will reap seven or eight per cent in order to gain five per cent in a mortgage. But ultimately, no one knows what their investments will earn, so they have to take a calculated risk as to whether to buy their own mortgage or buy something else.

Besides that key factor, it's important to watch the hidden fees.

The Canada Revenue Agency, for example, demands that when you put your home mortgage into your RRSP, you insure the mortgage, pay yourself interest at market rates and appoint an arm's-length third party to be a trustee over the whole shebang. This will cost about $1,000 up front and $200-$350 per year, plus a percentage or three for the insurance.

I talked to two real estate lawyers, John Knibbe in Calgary and Calvin MacPherson in Brampton, both practising in the residential real estate arena. Each of them has advised clients on this option, though infrequently. Most people, after all, would rather go for the big returns in the markets than the safe, modest returns of a mortgage. MacPherson said none of his clients adopted the strategy once they had seen the fees.

It all boils down to weighing investment options. There are many out there, and this one, like any, is buyer be aware, be a weigher and beware. Watch for the hidden costs, fees and shysters.

One of the financial advisers - who used to arrange these for her clients but abandoned them a few years ago because they were too much trouble to administer - warned me that the banks are not going to promote these plans because banks make a lot of money automating transactions. Financial institutions can administer a mortgage very leanly and cleanly. It's hard for a self-directed plan to be so efficient. As a result, the credit union she works for stopped offering the service.

Let that be an encouragement and a warning. Few people are going to promote this to you, because you're the only potential winner. There's not much upside for anyone else. But that also means you'll be standing there alone cutting the path.

(Ian van de Burgt can be reached at ian@businessedge.ca)