[Harper77]

Hi all.
Wife and I are wanting to purchase first home - live with inlaws presently.

We have approx 4K in RRSP and another 1500 in savings.

We were thinking of doing this: get an RRSP loan for 10K - use the RRSP Homebuyers thing as our deposit. Take the refund we get on our tax as well as money we will save up to get rid of the RRSP loan - does this make sense?

How easy do banks give RRSP loans? I have never done this before so pardon if I sound like an idiot.

 

[Rickson9]

No offense, but it would seem to be a bad idea to purchase a home in your current financial situation.

 

[Rickson9]

No offense, but it would seem to be a bad idea to purchase a home in your current financial situation.

 

[Harper77]

No offense, but it would seem to be a bad idea to purchase a home in your current financial situation.

Why would that be?

We are only looking at the price range of 160-170K. Its the deposit we are trying to get - everything else is fine.

 

[Spidey]

I agree. You probably will have to save for at least 2 more years. If you are both working I would suggest trying to put away most of one partner's salary.

 

[Harper77]

I agree. You probably will have to save for at least 2 more years. If you are both working I would suggest trying to put away most of one partner's salary.

Whats wrong with I suggested? It gets us in the housing game alot faster than trying to scratch and save, plus why rent when a mtge is cheaper anyways.

 

[Spidey]

Why would that be?

We are only looking at the price range of 160-170K. Its the deposit we are trying to get - everything else is fine.

You can't take a loan and then have the proceeds considered as equity. Your net situation has not changed. Banks look at the total amount of debt that you have owing. You have to save more of a down payment.

 

[Harper77]

You can't take a loan and then have the proceeds considered as equity. Your net situation has not changed. Banks look at the total amount of debt that you have owing. You have to save more of a down payment.

But I can get an RRSP loan, can I not?
And then use those RRSP's as my downpymt under the Home Buyers Plan.

 

[leslie]

Banks restrict the $$ they will lend you for good reasons.... They only lend what they think you can support with your income. There is really no reason for you to presume their reasoning is wrong. Which is what you are doing by trying to increase the amount of your total debt to do this deal.

The loan to your RRSP should be considered just as (or even more so) onerous than a loan to the bank. Consider it a loan to the government, because when you fail to make proper payment they have the power to come down hard. Do not shrug off this part of your debt " because I am borrowing my own money".

Your argument really rests on the phrase "money we will save up". You 'save' money BEFORE a purchase. You pay interest and principal to pay down debt AFTER a purchase. You have not been successful (two incomes for how long?) saving money to-date, so why do you expect things to change?

You still do not have an emergency fund, much less a fund for the real-estate purchases you will make as soon as you buy ppty.

Wait and save. Change your thinking from "getting into the game" toward "setting up solid financial footings".

 

[HaroldCrump]

Whats wrong with I suggested? It gets us in the housing game alot faster than trying to scratch and save, plus why rent when a mtge is cheaper anyways.

Cheaper from a monthly cash-flow perspective only, maybe.
The RRSP HBP is like a loan against your own RRSP.
You are taking on 3 types of loans, if you do this:
- RRSP loan of 10K
- The HBP loan against your own RRSP, which you need to "pay back" to your RRSP in future
- The mortgage itself

If you hate living with in-laws (and I fully understand), renting for a couple of years is probably a better option for you.

 

[Oldroe]

You need to add more info. Combined income and any other debt how secure your employment is.

So far you are drawing very thin, work for a stronger position.

 

[Harper77]

Cheaper from a monthly cash-flow perspective only, maybe.
The RRSP HBP is like a loan against your own RRSP.
You are taking on 3 types of loans, if you do this:
- RRSP loan of 10K
- The HBP loan against your own RRSP, which you need to "pay back" to your RRSP in future
- The mortgage itself

If you hate living with in-laws (and I fully understand), renting for a couple of years is probably a better option for you.

But is what I am saying above though - can it be done?

 

[Rickson9]

But is what I am saying above though - can it be done?

Ask a bank. They will have people that can advise you. Expect that it cannot be done.

 

[MoneyGal]

The issue is not "can I do this?" as in, is it technically possible? The issue is whether you will find a lender who is willing to take the default risk. And, like others have said, we don't know enough about your personal situation to answer that (plus...we aren't banks!).

Like Rickson said (I think in the other thread), I'd expect a "no" if you posed this question to your bank.

 

[Shayne]

I posted this earlier but I think in the wrong spot.

Wife and I are wanting to purchase first home - live with inlaws presently.

We have approx 4K in RRSP and another 1500 in savings.

We were thinking of doing this: get an RRSP loan for 10K - use the RRSP Homebuyers thing as our deposit. Take the refund we get on our tax as well as money we will save up to get rid of the RRSP loan - does this make sense?

How easy do banks give RRSP loans? I have never done this before so pardon if I sound like an idiot.

As long your debt servicing ratios are in line and you have adequate credit it will be easy to get a loan for an RRSP.

Get the loan and have the bank put it in a savings account until you can "decide what to do with it" and you will be fine.

I would have a broker assist you with this as you will have to ensure that the loan does not screw up your ratios to the point of not being approved. There is also an issue of timing. The cash has to sit in your RRSP for 89 or 90 days. PM me if you have any further questions.

 

[Cal]

We have approx 4K in RRSP and another 1500 in savings.


Dude...you guys need to save alot more! Do whatever financing that you want, or whatever someone is willing to lend you. You still need to save alot more before you consider a home purchase.

How long did it take to save the $4K plus $1500? 1 month? 3 months....then maybe in a year or two consider buying a home. (I think the average CDN home is $420K) but keep saving up.

If it took you longer to save up the money...then keep saving, and don't think of buying RE at this point.

Read the above messages...leslie had good advice...get good financial stability first.

We have no agenda to keep you out of the RE market. You have received good advice. Save, Save, Save.

 

[Cal]

And while I am on it:

Real Estate (RE) could very well be the largest purchase that you will ever make. It is not a game. (As many Americans can attest)

Also...I am not against getting a loan to finance your RRSP's, however I am not in favour or losing the compound interest of withdrawing them to make a down payment on a home. If I needed to do that I would simply wait longer and save more for my downpayment.

 

[HaroldCrump]

But is what I am saying above though - can it be done?

Can? - Maybe.
Should - probably not.
You are taking on huge amounts of risk by doing this.
What's wrong with renting an apartment for a few years?
In the end, it is your personal call.
Living with your in-laws or renting may be so intolerable for you that this is something you HAVE to do for yourself and your family.
In that case, the numbers math and financial viability may be secondary for you.
Sometimes we may have to do things for emotional reasons that may not be the best from financial perspective.
It's up to you.

Last note: as someone else said, a bank may not let you do it the way you describe.
You may want to break this across a couple of years.
i.e. take the 10K RRSP loan now and put it into RRSP.
Apply the tax credit towards the loan and aggressively pay the rest as much as you can.
Next year use the HBP as down payment.
Doing all 3 at the same time will be a red flag for most lenders/banks.

 

[leslie]

OK. All 5 contributors think this is a terrible idea. Yet your response is 'but I'm going to do it anyway. Can it be done?'

How exactly does your 'other half' feel about this? It is her (I bet) life you will be mucking up as well as your own. Her parents are trying hard to give you a solid start by letting you live with them. Is this the way you pay them back?

Surely you can see that assuming risk MUST be acceptable by BOTH partners.

 

[Harper77]

As long your debt servicing ratios are in line and you have adequate credit it will be easy to get a loan for an RRSP.

Get the loan and have the bank put it in a savings account until you can "decide what to do with it" and you will be fine.

I would have a broker assist you with this as you will have to ensure that the loan does not screw up your ratios to the point of not being approved. There is also an issue of timing. The cash has to sit in your RRSP for 89 or 90 days. PM me if you have any further questions.

The reason why I ask this is because someone told me thats the fastest way to get money for a downpymt. We really only need 10K.
I understand that it has to be in RRSP for 90 days to be considered for Homebuyers Program - but the refund I get back from my tax return from purchasing RRSP's as well as the money we have saved up thusfar can be thrown right on the RRSP loan.