First time home buyer with RRSP money.... and a couple other questions.

[88CRX]

Going to possibly buying a place in the next couple weeks here and I have a couple questions that I'm not sure about, and my parents have not bought any properties in years so they're not much help.

So this place I'm looking at is asking for a $2500 payment to hold the property while I find financing crap through the bank. I have 10 days to get my shit fiqured out. Then they require 5% down minus the 2500 payment.

Now what I need to know is what RRSP money can I use and when as a first time homebuyer? Construction is starting soon and they should be done with 1-1.5 years. If I withdraw whatever RRSP money I want to now (say $10-15k) can I then put more money down out of my RRSP when I take possesion of the place once its built? Or are you only alloud 1 downpayment as a first time homebuyer?

Also I've set up an appoitment at the Royal Bank with a mortgage broker to discuss how much I can get... my dad is coming with me, now do they have "co-signers" for mortgages or how does that work? And where else should I go as I remember reading a actual mortgage broker can get me lower interest rates, correct? Any recomendations?

[xrayvsn]

You have to register to withdraw your RRSP through the HomeBuyers Plan (HBP) or you will be hit with income tax. You can't just pull money out and use it without letting the institution that you have your RRSP through that you are using the money for HBP.

You can withdraw up to $20,000 from RRSP to use as a downpayment. read this from the government for the details:

http://www.cra-arc.gc.ca/E/pub/tg/rc4135/rc4135-06e.pdf

As far as a co-signer, if you put your dad as a co-owner, then you can have him as a co-signer. You may be able to qualify for a larger mortgage, and his assets can make it seem like you are less of a risk, thereby getting you a better interest rate.

[88CRX]

Thanks, I've been navigating through the CRA website but didnt find that yet... I'm printing it off... hope it answers some of my question.


edit: let me get this straight.... I have to be in a writen contract (paid my 5% down) to be able to qualify for the HBP?

[xrayvsn]

No, I think you would have to be on your own for the first $2500, if that is what the builder needs to sign the contract. Once that is a go, you can withdraw up to $20,000 of your RRSP to put the rest of the 5% downpayment.

From reading that brochure, it sounds like you can withdraw from the HBP in one calendar year, so I assume that means you can pull out your RRSP funds several times to a max of $20,000 in that year.

[88CRX]

Originally posted by xrayvsn
No, I think you would have to be on your own for the first $2500, if that is what the builder needs to sign the contract. Once that is a go, you can withdraw up to $20,000 of your RRSP to put the rest of the 5% downpayment.

From reading that brochure, it sounds like you can withdraw from the HBP in one calendar year, so I assume that means you can pull out your RRSP funds several times to a max of $20,000 in that year.

Yup, thats what I gathered from that article as well.

However, its also states that you must "buy or build" before the year after the withdrawls by Oct 1. What the hell is all that crap about, what if the project goes over schedule, which it will.

[xrayvsn]

Check out page 8, especially example 5. You should still qualify if your builder is "at arms length", which should be the case unless you are the contractor.

[bamboo403]

i have a question about this too. i was going to dump 10k into an rrsp and then use it for a down payment and then claim the 30% on my taxes next year. but is it true that the funds need to be in the rrsp for 90 days before you can do a hbp? i will be buying within 30 days but if i can do that i would extend for up to two weeks. any suggestions?

[msommers]

Sorry to slightly hijack but what are people's opinions on using RRSP contributions for a first-time house downpayment? It really seems to depend on who it is, all the accountants I talk to say it's better in the long run NOT to but sometimes it's the only way. Others mention its the best thing to do.

[max_boost]

It's fine to use the RRSP, you have up to 15 years to pay it back I believe but will you? Home ownership will you strap you for cash for a long time and you'll lose out on the compound interest, time value of money benefits of investing.

It's a tough decision. RRSP withdrawal might be the only way though if you really want to purchase a home.

[asuth077]

Originally posted by max_boost
It's fine to use the RRSP, you have up to 15 years to pay it back I believe but will you? Home ownership will you strap you for cash for a long time and you'll lose out on the compound interest, time value of money benefits of investing.

It's a tough decision. RRSP might be the only way though if you really want to purchase a home.

I am saving my downpayment in RRSPs simply becuase my employer matches contributions to a certain percent of my income.

[max_boost]

Originally posted by asuth077


I am saving my downpayment in RRSPs simply becuase my employer matches contributions to a certain percent of my income.

That's a great way to save. If you are a high income earner, you can utilize employer contribution, tax refund and RRSP withdrawal, can get a downpayment together quickly.

[Weapon_R]

Before you put the money down, see whether you can qualify for enough. I've seen too many times where someone will drop the deposit and lose a ton of money because they failed to qualify for a mortgage.

Get yourself a GOOD broker if you don't have good credit. Banks want stable customers and brokers have different techniques to get you money. Good brokers can mean the difference between qualifying and losing a ton of money. Not all brokers are the same, and sometimes one will not be able to qualify you while others have no problem doing so.

[88CRX]

Using RRSP for first time home buyer is a great idea IMO. First off the money sitting in the RRSP make interest (mor ethen if it was in a regular savings account) plus you get a huge tax break. 30% return on your money

And even if you max out and use $20k out of RRSP your monthly payments to pay it back are only $111. Plus that money your reinvesting (which you should be anyways) is your money when you retire. I dont understand a better and comparably safe way to save extra money for a downpayment.

[88CRX]

Originally posted by Weapon_R

Get yourself a GOOD broker if you don't have good credit. Banks want stable customers and brokers have different techniques to get you money.

Will a bank provide lower rates if you have outstanding credit compared to a broker? Should I even bother with a broker if my dad will be assuming a mortgage to me and he has perfect credit and owns a house. Will a broker still be cheaper?

Originally posted by Weapon_R
Before you put the money down, see whether you can qualify for enough.

The developer is giving me 10 days to get financing, if for whatever reason I can't get it they will refund my $2500 deposit and I'll be on my way.

[sputnik]

Originally posted by max_boost
It's fine to use the RRSP, you have up to 15 years to pay it back I believe but will you? Home ownership will you strap you for cash for a long time and you'll lose out on the compound interest, time value of money benefits of investing.

It's a tough decision. RRSP withdrawal might be the only way though if you really want to purchase a home.

I believe that you are actually required to pay a portion back every year out of your RRSP contributions.

Using your RRSP money is no different than saving other money and putting it towards a house. Personally what I did was put my downpayment money into an RRSP in January and also borrowed more RRSP money against my tax return. When I got my return I paid off the debt and took out the entire downpayment in April to buy a house.

[Weapon_R]

Originally posted by 88CRX


Will a bank provide lower rates if you have outstanding credit compared to a broker? Should I even bother with a broker if my dad will be assuming a mortgage to me and he has perfect credit and owns a house. Will a broker still be cheaper?




The developer is giving me 10 days to get financing, if for whatever reason I can't get it they will refund my $2500 deposit and I'll be on my way.

If you can, i'd skip out on the broker and head straight for the bank. Banks will almost always match your brokers rates if you can show them that you have received a lower rate. Brokers are great for less than perfect credit, but dealing with private lenders sucks sometimes because some of them are shady. Once a broker gets you the mortgage, your on your own to deal with the company directly.

[88CRX]

Originally posted by sputnik


I believe that you are actually required to pay a portion back every year out of your RRSP contributions.

Yup, you pay 1/15th back each year for 15 years.

Originally posted by sputnik
Using your RRSP money is no different than saving other money and putting it towards a house. Personally what I did was put my downpayment money into an RRSP in January and also borrowed more RRSP money against my tax return. When I got my return I paid off the debt and took out the entire downpayment in April to buy a house.

basicly what I'm doing.

[rc2002]

You can only take $20k out of your RRSP's? Sounds like it's more trouble than it's worth.

[88CRX]

Originally posted by richardchan2002
You can only take $20k out of your RRSP's? Sounds like it's more trouble than it's worth.

Its basicly free money.... yes its alittle trouble but its not rocket science.

You fill out 1 form to withdraw money from your RRSP, its not that hard once you figure out if you qualify or not.

[D. Dub]

pm'ed