(Closed) Use RRSP to buy house?

posted 6 years ago in Home
Post # 3
Member
799 posts
Busy bee
  • Wedding: June 2011

We used our RRSPs (about the same amount as you) for our first home purchase as well.

 

It didn’t change how much we spent, just helped us put more down, and the $10K isn’t a lot to pay back over 15 years with our income! We didn’t have a lot to put down, so this really helped us feel better about our downpayment amount, and since it was “free” to do, we felt comfortable doing it! In our  circle, using it is very common, I would say why not, but of course, you have to be comfortable with it ๐Ÿ™‚

Post # 4
Member
10563 posts
Sugar Beekeeper
  • Wedding: January 2011

I made a post about the HBP not too long ago.  Many of the American bees didn’t seem to be for it, but by the sounds of it the similar plan in the US is very different.

I’m still not sure if we use it (if we do it will not be anywhere near the max), but I think it can be a good idea to use it.  Just make sure you have enough each month to easily repay it.  It especially makes sense if it means you’re avoiding CMHC fees IMO.

Post # 6
Member
2820 posts
Sugar bee
  • Wedding: February 2013

I’ve heard REALLY bad things about doing that. : / I’ve never looked into it, and can’t give any personal stories, but I’ve heard horror stories about how bad the penalties are for cashing out your RRSPs earlier.

Post # 7
Member
10563 posts
Sugar Beekeeper
  • Wedding: January 2011

@Jenniphyr:  If you use the HBP and repay them, there is no penalty.

Post # 8
Member
247 posts
Helper bee
  • Wedding: April 2013

i used RRSP’s for my 1st home purchase. Infact I put in extra money into my rrsp before buying, to maximize it.  But i was a 1st time home owner, so things may be different. i Suggest talking with ur financial advisor.

 

Post # 10
Member
2233 posts
Buzzing bee
  • Wedding: September 2012

@anotherbee:  Typically you pay it back when you are filing your taxes and not on top of your regular RRSP contributions. When you file there will be a portion that is for HBP  and it calculates for you how much you pay. You also don’t pay anything back the first 2 years. 

OP, are you a first time home buyer? You MUST be a first time home buyer to pull out RRSPs. This has all the requirements that must be met: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/cndtns/menu-eng.html

FI used his to add to his downpayment when he purchased a few years ago and it’s an excellent idea. 

FWIW I would always invest in property over the very small potential growth in RRSPs. Just as an example if someone invested 20k into a home as a downpayment and paid $200k (so not the full 20%) in some places that home is now selling for $500K+. You would never get that return with RRSPs.

Post # 11
Member
3886 posts
Honey bee
  • Wedding: September 2011

It’s really hard to guess how that is going to play out because it depends on how the money in your retirement plan is invested.  Once you hand your money over to the retirement plan, what do they do with it? Does it go to a mutual fund/stock-based investment or does it go into REITs or Municipal bonds or a simple interest-bearing account?  

The big question is, which is expected to gain more value in 15 years: $20k worth of property values or $20k worth of that unknown other investment?  If the retirement plan ends up in government or municipal bonds (fairly stable but low return) then the property value is almost certain to be worth more at the end of 15 years and is therefore the better way to go. It’s tougher to say if it’s based in mutual funds or stocks because then you have to look at the stock makeup, but $20k invested in Apple 20 years ago would be worth way more than $20k of real estate in most places (and $20k invested in Research in Motion would be worth only a fraction of its then-value).

Post # 12
Member
8884 posts
Buzzing Beekeeper

FI and I used our RRSP’s with the HBP to help purchase our home. It helped us put a bigger down payment to about CMHC. We’ve got a long time to pay them back and we make decent money so it shouldn’t be a problem ๐Ÿ™‚

Post # 14
Member
2233 posts
Buzzing bee
  • Wedding: September 2012

@anotherbee:  Yeah unfortunately if you own title/deed to anything then you are no longer considered a first time home buyer. ๐Ÿ™

Post # 15
Member
13101 posts
Honey Beekeeper
  • Wedding: July 2010

I wouldn’t – if you pull the money out of those investments, you are losing the growth that money would otherwise be earning.  Retirement accounts are the most beneficial when you put money in them early and leave it alone so that it can continue to compound and grow.

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