This technique is simple. If you are young, with good credit, making a good income but haven’t had enough time to save up your down payment, and you still want your mortgage right away; this is for you. Under the Home Buyer’s Plan (HBP), the Canadian government allows first time home buyers to withdraw funds from their RRSP up to 25K per person in order to purchase their first property. You have 15 years (plus 2 years of grace period without payments) to put your RRSP money back.
If you want to take advantage of this program, but you do not have enough in your RRSPs, I have a solution for you. Most financial institutions are offering RRSP loans, some even with deferred payments. Because of the tax benefits of your new RRSP contribution, you should be receiving a higher tax return. In order for this technique to work to your full advantage, it is strongly suggested that you use the additional funds from your tax return to pay down your new loan. Here is a great tool that will show you how much your tax return will increase with the additional RRSP contribution http://intuit-support.intuit.ca/tools/taxcalc/rrspCalc.html
As per the government’s HBP, the funds can only be withdrawn after 90 days. This is generally sufficient time to satisfy a lender’s condition of the 3 month history and therefore the down payment would generally be viewed as savings.
The advantage of this technique:
• You get your property faster
• You can take advantage of low real estate pricing and very low mortgage rates while the opportunity is still here
• Since you buy your home now, you avoid the risk of seeing the same house’s value increasing significantly by the time you accumulate your cash down
• You will be forced to reimburse your RRSP contribution which is a good thing for retirement planning
• You may avoid CMHC insurance premium
The disadvantage of this technique:
• You have to pay interest on your new loan until it is paid off. Most professionals agree that an RRSP loan should be paid off within the first 2 years if possible. Again, if you apply your increased tax return directly to your loan, this should significantly reduce the remaining balance.
• You are forced to reimburse the funds into your RRSP over 15 years
• You will want to be sure that you are qualified for a mortgage and that you want to buy a house. If not, you will be stuck with the payments of the RRSP loans (but you will still have the advantage of having the RRSP)
Overall, this is great technique for those who use it correctly and who have a suitable financial situation. Contact me today to find out about RRSP loans or for any mortgage information.
Here is a link to the information on the Home Buyer’s Plan http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/menu-eng.html
www.christinebuemann.com "always working for your best interest"
If you want to take advantage of this program, but you do not have enough in your RRSPs, I have a solution for you. Most financial institutions are offering RRSP loans, some even with deferred payments. Because of the tax benefits of your new RRSP contribution, you should be receiving a higher tax return. In order for this technique to work to your full advantage, it is strongly suggested that you use the additional funds from your tax return to pay down your new loan. Here is a great tool that will show you how much your tax return will increase with the additional RRSP contribution http://intuit-support.intuit.ca/tools/taxcalc/rrspCalc.html
As per the government’s HBP, the funds can only be withdrawn after 90 days. This is generally sufficient time to satisfy a lender’s condition of the 3 month history and therefore the down payment would generally be viewed as savings.
The advantage of this technique:
• You get your property faster
• You can take advantage of low real estate pricing and very low mortgage rates while the opportunity is still here
• Since you buy your home now, you avoid the risk of seeing the same house’s value increasing significantly by the time you accumulate your cash down
• You will be forced to reimburse your RRSP contribution which is a good thing for retirement planning
• You may avoid CMHC insurance premium
The disadvantage of this technique:
• You have to pay interest on your new loan until it is paid off. Most professionals agree that an RRSP loan should be paid off within the first 2 years if possible. Again, if you apply your increased tax return directly to your loan, this should significantly reduce the remaining balance.
• You are forced to reimburse the funds into your RRSP over 15 years
• You will want to be sure that you are qualified for a mortgage and that you want to buy a house. If not, you will be stuck with the payments of the RRSP loans (but you will still have the advantage of having the RRSP)
Overall, this is great technique for those who use it correctly and who have a suitable financial situation. Contact me today to find out about RRSP loans or for any mortgage information.
Here is a link to the information on the Home Buyer’s Plan http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/menu-eng.html
www.christinebuemann.com "always working for your best interest"
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