Personal Finance

What is the best thing I can do?

  • Last Updated:
  • Jan 15th, 2019 10:17 pm
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[OP]
Newbie
Mar 28, 2017
29 posts
2 upvotes

What is the best thing I can do?

I run a Small Business.
I earn about 8k-9k a month.
$800 tfsa
$200 resp
both are mutual funds from RBC
I want to buy a house in 3 or 4 years later
what should I do my best?
actually,I think i make 25k by putting $500 into rrsp every month for HBP
Is this a good idea?
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The reason why I want to deposit $500 rrps every month
1.tax credit
2.HBP can withdraw 25k from rrsp it is maximum
i heard that after withdrawing, i can pay just tax instead of putting money back. for 15 years (1666X15)
Last edited by ga5060 on Jan 12th, 2019 11:42 pm, edited 1 time in total.
15 replies
Sr. Member
Nov 8, 2006
678 posts
141 upvotes
Toronto
We have no idea what you are trying to do.
1. What is your house budget?
2. Single income?
3. Debt?
4. Sending habits?
5. How much you save each month?

too many unknowns.
Deal Addict
Dec 12, 2009
2795 posts
928 upvotes
Toronto
ga5060 wrote:
Jan 11th, 2019 5:45 pm

I want to buy a house in 3 or 4 years later
actually,I think i make 25k by putting $500 into rrsp every month for HBP
Putting it in perspective
$500 a month will take > 4 years to get to $25K
That would allow for 5% down on a $500,000 mortgage. Same mortgage at 20% down would require you to put away $2K a month for the same time period.
Deal Fanatic
User avatar
Jun 26, 2005
8987 posts
1124 upvotes
Toronto
Personally, I dislike the HBP idea. I haven't done extensive math on it,I just imagine, if I use HBP , with my mortgage that I just opened, now I have two big holes to fill.

Also, that money supposedly was for retirement. So now you've also drained a big chunk of your retirement money. One can say that's hole number 3?

I would rather have one hole to fill (mortgage). So I would not put my house down payment money I to RRSP. If anything, put in TFSA and grow the heck out of that.

Again, maybe one gains more from tax credit from RRSP, I haven't done the math. But logically I don't like using RRSP money for home buying. I Save up for home outside RRSP.
[OP]
Newbie
Mar 28, 2017
29 posts
2 upvotes
marketb wrote:
Jan 12th, 2019 10:34 am
We have no idea what you are trying to do.
1. What is your house budget?
2. Single income?
3. Debt?
4. Sending habits?
5. How much you save each month?

too many unknowns.
1 Probably 500k-550k.
2. me and wife work together
3. fixed expenditure $2800+grocery(1000-1500)+debt(2500)
4 no drink and smoke
5. about 2k
Deal Addict
Nov 22, 2015
3737 posts
2760 upvotes
ga5060 wrote:
Jan 12th, 2019 10:47 pm
1 Probably 500k-550k.
2. me and wife work together
3. fixed expenditure $2800+grocery(1000-1500)+debt(2500)
4 no drink and smoke
5. about 2k
What kind of debt...? IMO primary goal should be to pay off your debts in full before worrying about little things like HBP.

Saving $2k a month?? Use that to pay off your debts instead.

Then max out your TFSAs, followed by RRSPs. You can always withdraw from TFSA to contribute to RRSP for HBP closer to the closing date
[OP]
Newbie
Mar 28, 2017
29 posts
2 upvotes
ROYinTO wrote:
Jan 12th, 2019 1:39 pm
Putting it in perspective
$500 a month will take > 4 years to get to $25K
That would allow for 5% down on a $500,000 mortgage. Same mortgage at 20% down would require you to put away $2K a month for the same time period.
I don't understand.
[OP]
Newbie
Mar 28, 2017
29 posts
2 upvotes
superfresh89 wrote:
Jan 12th, 2019 10:56 pm
What kind of debt...? IMO primary goal should be to pay off your debts in full before worrying about little things like HBP.

Saving $2k a month?? Use that to pay off your debts instead.

Then max out your TFSAs, followed by RRSPs. You can always withdraw from TFSA to contribute to RRSP for HBP closer to the closing date
i see
I borrowed money from my parents while I was setting up a store.
I pay back my debts of 2.5k every month.
But there are not enough room in tfsa. I immigrated in 15 years and my room is 3.2k.
And now I deposit $800 a month.
Deal Addict
Dec 12, 2009
2795 posts
928 upvotes
Toronto
ga5060 wrote:
Jan 12th, 2019 10:47 pm
1 Probably 500k-550k.
2. me and wife work together
3. fixed expenditure $2800+grocery(1000-1500)+debt(2500)
4 no drink and smoke
5. about 2k
ga5060 wrote:
Jan 12th, 2019 10:57 pm
I don't understand.
Your initial post said you could put $500 a month away. I was basing the value on that. The post quoted here indicates that you might be able to put $2K away in savings.
If that means you can put a combined total of $2500 a month away, at the end of 4 years you would have ($2500 x 48 months) = $120K in savings for a down payment.
That would give you the 20% down to qualify for a conventional mortgage in your price range.
With only $500 a month getting put away, you would barely have saved enough for the 5% down for a high risk mortgage of $500K.
Newbie
Nov 2, 2006
19 posts
2 upvotes
Vancouver
I earn about 8k-9k a month.
Let's subtract the 2.5k from that 8-9k make it more simple to calculate. Also, you can maybe make that payment as your business loan/expense to save up on taxes if it was borrowed for setting up store.
Sr. Member
Nov 6, 2015
660 posts
252 upvotes
Guelph, ON
rfdrfd wrote:
Jan 12th, 2019 2:52 pm
Personally, I dislike the HBP idea. I haven't done extensive math on it,I just imagine, if I use HBP , with my mortgage that I just opened, now I have two big holes to fill.

Also, that money supposedly was for retirement. So now you've also drained a big chunk of your retirement money. One can say that's hole number 3?

I would rather have one hole to fill (mortgage). So I would not put my house down payment money I to RRSP. If anything, put in TFSA and grow the heck out of that.

Again, maybe one gains more from tax credit from RRSP, I haven't done the math. But logically I don't like using RRSP money for home buying. I Save up for home outside RRSP.
Really, there's only one "hole", you are just deciding which one it will be. $25K of RRSP - $25K of extra mortgage = $0, so you are not any ahead if you choose the "mortgage hole" vs. the "HBP hole".

I did this strategy of saving my down payment in an RRSP HISA. By doing this I got several thousand back in tax returns which also went towards the down payment, plus the little pit of interest that was not taxed.

Now, if I had decided it was "bad" to take from my RRSP, I could have just saved the money in a regular HISA (maybe under a TFSA), and not gotten those extra thousands.

So with HBP I had several thousand extra to put towards the down payment. My total owing is no more than without HBP, except the $25K I owe to myself is not charging any interest to me. So that's 2 ways I come out ahead.
Sr. Member
Nov 6, 2015
660 posts
252 upvotes
Guelph, ON
To the OP's question, if you are buying the house in 3 to 4 years you shouldn't be "saving" in mutual funds, those need at least 10 years to assume you will come out ahead. You should only be putting the money in a HISA or GIC's. That's regardless whether you are planning to use RRSP/HBP, TFSA, or just an unregistered account.
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User avatar
Jun 26, 2005
8987 posts
1124 upvotes
Toronto
JoeBlack23 wrote:
Jan 14th, 2019 1:14 am
Really, there's only one "hole", you are just deciding which one it will be. $25K of RRSP - $25K of extra mortgage = $0, so you are not any ahead if you choose the "mortgage hole" vs. the "HBP hole".

I did this strategy of saving my down payment in an RRSP HISA. By doing this I got several thousand back in tax returns which also went towards the down payment, plus the little pit of interest that was not taxed.

Now, if I had decided it was "bad" to take from my RRSP, I could have just saved the money in a regular HISA (maybe under a TFSA), and not gotten those extra thousands.

So with HBP I had several thousand extra to put towards the down payment. My total owing is no more than without HBP, except the $25K I owe to myself is not charging any interest to me. So that's 2 ways I come out ahead.
Don't you still have to contribute back to your RRSP amount you took out within 15 years? If not, then that $25k will be put as income and taxed.

Versus, if you saved it outside RRSP, the above debt (hole) doesn't even exist.

Yes you got thousands back in refund, but took away that many years of growth from RRSP out and used it for the present. We can't buy TIME back.

HBP to me is, forget about my future, which I've been saving for, just let me use that money NOW for something I didn't have enough money for, but I'm willing to forgo my future (retirement savings).
Newbie
Mar 7, 2008
48 posts
10 upvotes
Saskatchewan
I go by a few rules:
-avoid debt! Think three times before getting into debt unless it generate income or appreciate.
-spend your money on asset that appreciate. I have no problem buying a Rolex (not all rolex can hold value that well, but I recently sold my Rolex at what I paid for four years ago) but I still drive my ten yrs old beater. That is just one extreme example.
-investment in stocks will rarely makes it big (how many people you know got rich from stocks or mutual fund? Instead, you probably know a few people who got rich from doing busienss!). So focus on business for me.
-and monitor you net worth!
Sr. Member
Nov 6, 2015
660 posts
252 upvotes
Guelph, ON
rfdrfd wrote:
Jan 14th, 2019 9:28 am
Don't you still have to contribute back to your RRSP amount you took out within 15 years? If not, then that $25k will be put as income and taxed.
Yes, but I owe that $25K to myself, and I don't charge myself interest. If I keep it in my RRSP, that's $25K more on my mortgage which I'm also paying interest on. Now, a fair argument is that you may get a better return on your RRSP investment then what you save in mortgage interest. However, the only way you could do that is with equity investments. The OP wants to buy a home in 3 or 4 years, so equity investments is too short a time frame. Hence he will need to put his money into HISA or GIC's, and if he's going to that, might as well put them under an RRSP and also get the tax returns on it.
rfdrfd wrote:
Jan 14th, 2019 9:28 am
Versus, if you saved it outside RRSP, the above debt (hole) doesn't even exist.
OP says he's planning to buy a house, so the debt (hole) is going to exist, i.e. the mortgage.
rfdrfd wrote:
Jan 14th, 2019 9:28 am
Yes you got thousands back in refund, but took away that many years of growth from RRSP out and used it for the present. We can't buy TIME back.
When I'm old, I doubt I will wish I had spent a few more years in a cramped apartment instead of getting a nice house a few years sooner. That's TIME better spent, in my opinion.
rfdrfd wrote:
Jan 14th, 2019 9:28 am
HBP to me is, forget about my future, which I've been saving for, just let me use that money NOW for something I didn't have enough money for, but I'm willing to forgo my future (retirement savings).
I'm not exactly blowing my money on a Vegas vacation or a sports car, it's on an asset that will likely appreciate in value so I hardly see that as "forgoing my future". By the time I retire, I may have slightly lower RRSP nest egg, but I will have a fully paid off house. By that time, I will likely be down-sizing and the equity in the house will more than likely make up for the slightly lower RRSP (and I'm not going to pay tax on that either, unlike what I withdraw from my RRSP).

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