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Thread: RRSP first time home buyer downpayment question

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    Default RRSP first time home buyer downpayment question

    I know there are some mortgage agents on this forum, thus would like to ask them a question.

    My girlfriend and I are looking to buy a place, the idea came about from her dad/mom who is offering their rrsp as a form of a gifted down payment (possible?).

    So there would be 2 people on the application thus we are I believe eligible to use an rrsp of 25k each. It would be us on the application and not her parents.

    Is this scenario feasible?
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    I don't think the parents can gift you their RRSP as it has to be yours that you are withdrawing from

    you are allowed to draw up to 25,000/pp but you have to pay it back within 15 years, the first 2 years you don't have to pay anything and beginning on the 3rd is when you must pay the government back

    you are only allowed to withdraw once every 5 years for a RRSP down payment and it has to be your place of residence, you are not allowed to do it for an investment property

    as well there is a GST incentive of 3.5% on new home purchases
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    ^Correct, has to be your own RSP...

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    they can give you 25k which you can put into an RRSP for 90 days and withdraw it afterwards
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    great info thanks adam
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    yeah, I did this with my first house and some money from the in-laws. worked great. But has to be 90 days.
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    Originally posted by adam c
    they can give you 25k which you can put into an RRSP for 90 days and withdraw it afterwards
    Why would you do that?

    Maybe I'm missing something, but wouldn't the 25k gift be non-taxable in the hands of the recipient anyway so there's no benefit to putting it into an RRSP first?

    From the CRA

    Gifts and Other Voluntary Payments

    4. Amounts received as gifts, that is, voluntary transfers of real or personal property without consideration, are not subject to tax in the hands of the recipient...
    I guess that by putting it through your RRSP would then give a 25k deduction in the current tax year, so that would mean a bigger return this tax year. That is, if you make enough money to realize much benefit and have 25k of room in the current year to put into your RRSP that you wouldn't have used otherwise.

    It's not of any benefit to the parents that I'm aware of - they'd have to pay tax on the 25k as income in the current tax year.

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    Originally posted by dexlargo
    Why would you do that?

    Maybe I'm missing something, but wouldn't the 25k gift be non-taxable in the hands of the recipient anyway so there's no benefit to putting it into an RRSP first?

    From the CRA


    I guess that by putting it through your RRSP would then give a 25k deduction in the current tax year, so that would mean a bigger return this tax year. That is, if you make enough money to realize much benefit and have 25k of room in the current year to put into your RRSP that you wouldn't have used otherwise.

    It's not of any benefit to the parents that I'm aware of - they'd have to pay tax on the 25k as income in the current tax year.
    it's so you can claim the 25k RRSP on your taxes...
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    I don't believe it benefits the parents. It does however effectively increase the size of the gift, since you'll get a tax refund for that RRSP contribution.
    Quote Originally Posted by killramos View Post
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    You realize you are talking to the guy who made his own furniture out of salad bowls right?

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    ^^ It could be quite costly to the parents if the money is currently in their RRSP as they'd be withdrawing it to provide it to the children and it would be taxed in their hands.

    On a side note, are you sure you have sufficient RRSP room to contribute 25,000 if they gave it to you anyway?

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    Considering the parents would be giving them 25k i doubt they have an RRSP's to begin with and have more than enough contribution room, even then, they could spread the 25k between them
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    Originally posted by adam c
    Considering the parents would be giving them 25k i doubt they have an RRSP's to begin with and have more than enough contribution room, even then, they could spread the 25k between them
    Contribution room is less likely to be a problem since they could split it as you mentioned, but I think you misunderstood my comment about the $25k coming from an RRSP; I was speaking about the parents taking it from an RRSP. If the parents withdraw it from their RRSP then the parents will be taxed on it (it's not a matter of whether or not the kid has an RRSP)

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    agreed it would be dumb to take it from their RRSP if that's where in fact it was coming from
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    Could the parents not borrow against their rrsp's then "gift" that to you?

    Stick up with a 1% higher rate than current 5 year fixed and get a cash-back mortgage to pay off the "gift"?

    Just looking at alternatives.....
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