talking through home finances with mortgage broker

First time Home Buyer saving for your down payment:

This can seem like a daunting task with the markets these days, but it may be somewhat easier than you think.  I am speaking strictly in a YOUR ARE SAVING FOR A DOWN PAYMENT FOR A HOME, nothing more or less; this isn’t retirement advice so please remember that.  This is also applicable if you haven’t owned a home in the previous 4 years.

Ok so how do you save? I have always found it best; and this has been from experience, is that it is much easier to save first and spend later.  Most employees don’t have write offs as someone who is business for self would, so how do they save on their taxes?  The answer is through your RRSP’s.  Making contributions to your RRSP’s throughout the year (if you start after the deadline of March 1) can potentially net you a much larger tax return than normal; this happens because you are investing in an RRSP umbrella with money you have already paid taxes on. When it comes time to file your taxes and you use your RRSP’s your taxable income goes down dollar for dollar based on what you have contributed; for example:  If you are in a 30% tax bracket a $10,000 rrsp contribution will net you $3,000 back, so you can turn $10,000 into $13,000).  So now you have money in your RRSP’s and also have a larger return coming back to you!  But there is also something that may ensure you get that savings vehicle really running and I will elaborate on that more; but first lets ask ourselves this question.

“How can I buy a home for, lets say, $300,000 as soon as possible?”  This question has a few answers to it but what we are focusing on right now is down payment. The minimum down payment for a $300K mortgage is $15,000 (plus closing costs). So you will need to have $15K for a down payment. Now it is time to look at how to get that as soon as possible….

An RRSP loan! I know that “LOAN” sounds scary but just look at the example below:

Say that you have worked out that you are going to be getting about $5,000 back on your tax return.  If you talked to your financial advisor (I highly recommend everyone has one) they will be able to let you know what the optimum RRSP loan would be for you to maximize your return.  Once you get your tax refund back you use that money to pay off the RRSP loan.  Now you may be thinking that you no longer have the tax return but that simply isn’t the case. You have now gone from only getting $5,000 back on your tax return to now having a larger amount in your RRSP (money from the RRSP loan you have taken out).  Being a First Time Home Buyer allows you to roll out up to $25,000 of your RRSP without being taxed when you are purchasing a home (this is referenced as the Home buyers Plan).  So if you took out a $15,000 dollar RRSP loan you will be able to access that for your down payment.  Here is a link how to qualify

*There is a bit more to consider when doing this so it is important to do your research and talk to a Financial Advisor.  I can definitely help you with that and can answer any underlying questions you may have regarding the Home Buyers Plan.