Help how to pay mortgage downpayment

[Kaiyoti]

So I'm about to close a deal on this condo (first time home buyer)

For the downpayment, I have enough sum to pay for the down payment in my 2 savings account combined (Regular + TFSA). However, I also have a RRSP savings account which I can leave alone. My question is, should I be withdrawing from this RRSP account? I'm to understand that withdrawing from my RRSP account has a negative effect on my taxes for 2012 since it's taxable income, but I'm also aware that first time home buyers also get tax deductions, what should I be doing to save more? Any tips would be appreciated. Thanks.

Paul

[ronin1701]

Read here:

http://www.cra-arc.gc.ca/tx/ndvdls/t.../menu-eng.html

[ronin1701]

In a nutshell: if this is the first time you're purchasing a residential property (or haven't owned any residential property within the past five years) you can withdraw, tax-free, up to $20,000 from your RRSP.

The catch is that you're required to re-pay that amount to your RRSP over a period of 15 years.

So I'm about to close a deal on this condo (first time home buyer)

For the downpayment, I have enough sum to pay for the down payment in my 2 savings account combined (Regular + TFSA). However, I also have a RRSP savings account which I can leave alone. My question is, should I be withdrawing from this RRSP account? I'm to understand that withdrawing from my RRSP account has a negative effect on my taxes for 2012 since it's taxable income, but I'm also aware that first time home buyers also get tax deductions, what should I be doing to save more? Any tips would be appreciated. Thanks.

Paul

1. In general, the more you can pour into your down-payment the better.

2. it's only taxable if the withdrawal isn't done under the HBP programme (see the URL I posted above).

3. I'm not aware of any tax deductions that first time home buyers receive.

[Super_Chicken]

In a nutshell: if this is the first time you're purchasing a residential property (or haven't owned any residential property within the past five years) you can withdraw, tax-free, up to $20,000 from your RRSP.

The catch is that you're required to re-pay that amount to your RRSP over a period of 15 years.



1. In general, the more you can pour into your down-payment the better.

2. it's only taxable if the withdrawal isn't done under the HBP programme (see the URL I posted above).

3. I'm not aware of any tax deductions that first time home buyers receive.

You're actually allowed to withdraw $25,000 from your RRSP. (see that link posted above)

For number 3, I do remember hearing there are some things you can apply for for free cash back when buying your first home. A $750 credit and possibly some other things, but I don't have the info with me for it.

OP, if you don't mind me asking how much do you have in your savings, and how much in your RRSP? (I'm planning on doing the same as you soon)

[ronin1701]

You're actually allowed to withdraw $25,000 from your RRSP. (see that link posted above)

I stand corrected, thanks. It's been a while since I bought

[bcbgboy13]

Good place for Vancouver real estate prices:

http://vancouverpricedrop.wordpress.com/

[wayne74]

You're actually allowed to withdraw $25,000 from your RRSP. (see that link posted above)

For number 3, I do remember hearing there are some things you can apply for for free cash back when buying your first home. A $750 credit and possibly some other things, but I don't have the info with me for it.

OP, if you don't mind me asking how much do you have in your savings, and how much in your RRSP? (I'm planning on doing the same as you soon)

Yes there is a first time home buyers tax credit of up to $750

http://www.cra-arc.gc.ca/gncy/bdgt/2...tc-eng.html#q1

[Kaiyoti]

Thanks for the all the tip, I'll read the HBP for sure.

What does it mean repay? Does that mean HBP isn't an actual "withdraw", I'm just loaning from my RRSP account tax free and then recontribute the sum i loaned out within the next 15 years?

I have a two rrsp accounts (1 savings and 1 investment). Savings I opened it up before I joined my current company and the investment is through my company. Both account are roughly 15k, so totaling roughly 30k. Savings I have around 50k. I have enough for 20% down payment right now (without using digging into rrsp), so is it better to do the HBP, take out more, pour it into dp and save on mortgage interest? or is it better to leave the money in the growing RRSPs and earn interest from there?

Paul

[acetace]

Thanks for the all the tip, I'll read the HBP for sure.

What does it mean repay? Does that mean HBP isn't an actual "withdraw", I'm just loaning from my RRSP account tax free and then recontribute the sum i loaned out within the next 15 years?

Paul

Yes, effectively you are borrowing from yourself... that is exactly what it is. You put money into RRSP, which is tax-deferred and cannot be withdrawed unless you pay taxes on the withdraw amount. Now you want to take it out under HBP, which you do not pay taxes for the amount, BUT you are obligated to pay it back within 15 year span...

[Wing Nut]

If you don't need RRSP money to get 20% down, leave your RRSP alone. It's not free money as it will negatively affect your retirement income.

[dougboswell]

Yes, effectively you are borrowing from yourself... that is exactly what it is. You put money into RRSP, which is tax-deferred and cannot be withdrawed unless you pay taxes on the withdraw amount. Now you want to take it out under HBP, which you do not pay taxes for the amount, BUT you are obligated to pay it back within 15 year span...

You are suppose to put 1/15th of the total withdrawn each year. If you do not the government will add that amount as income to your taxable income

[acetace]

You are suppose to put 1/15th of the total withdrawn each year. If you do not the government will add that amount as income to your taxable income

Yes it is 1/15 per year of what you borrowed out from HBP. I should have specified. If you do not remember the amount it will show up on your tax assessment form as an attachment. If you decided not to pay it back, it is like dougboswell said, it will be taxed.

[Kaiyoti]

If you don't need RRSP money to get 20% down, leave your RRSP alone. It's not free money as it will negatively affect your retirement income.

Can you explain how this will negatively affect retirement income?

[SpillOnAisle9]

Can you explain how this will negatively affect retirement income?

It depends on how quickly you pay it back. Taking the money out (borrowing) takes it out of play
for a period of time. Assuming the investments would have gone up while you take time to
pay it back.....you would have less money later when you retire than if you hadn't taken it out.

[whyzze]

I would liquidate in this order - savings accounts > RRSP HBP > TFSA > RRSP.

Tax free growth is better than tax sheltered growth. If I'm going to defer one it's gonna be the tax sheltered RRSP.