Good answer.If you put the extra money in an RRSP, you can take advantage of the RRSP home buyers plan (HBP). If you manage to max that out ($25k), the next logical step would be to use the TFSA ($5k every year). If you manage to max out everything, then perhaps use a high interest savings account.
However, you are borrowing at a 0% interest.Borrowing from your RRSP should be thought of as borrowing from the government.
Not sure I would call it a red herring. That refund is the tax you paid on that income. Yes, you will have to return it to the government down the road when you withdrawal from your RRSP, but why it that a bad thing? It should be worth more since it accumulated tax free, and in a lot of cases it would be withdrawn at a lower marginal tax rate.Don't feel that you are forgoing the tax refund from RSP contributions. That refund is a red-herring in almost all analysis. When you eventually take your $$ out of the RSP you will have all the original tax refund PLUS ALL THE INCOME EARNED ON THAT REFUND taxed away.
Yes, but until you start taking money out of it your capital can grow tax free, which is actually one of the greatest benefits of RRSP.Don't feel that you are forgoing the tax refund from RSP contributions. That refund is a red-herring in almost all analysis. When you eventually take your $$ out of the RSP you will have all the original tax refund PLUS ALL THE INCOME EARNED ON THAT REFUND taxed away.
You are correct, the tax refund does not grow tax free, but so what? Your RRSP is growing tax free. And I did check out the link, but found it confusing and it proved nothing.Neither of the two posters above read what I capitalized in the original post, or checked the proof at the link given. Why not?
The tax refund DOES NOT GROW TAX FREE.
Leslie ... you did not read the above responses ... they are not proposing to use RRSP money for real estate downpayments ... they are proposing to use downpayment money for real estate downpayments, but channelling it through the RRSP beforehand ... they are not the same thing.I strongly disagree with using RRSP money for real-estate downpayments.
Conspiracy theory nonsense ... and like most conspiracy theories, this one is all delusion, and no substance ... when you draw money from your RRSP, through the HBP program, it is your own money you are borrowing ... not the government’s money ... the only stick the big bad gov’t has is the ability to treat the withdrawal as taxable income, if the HBP conditions aren’t met ... which, by the way, is no different than ANY other withdrawal that you will EVER make from RRSP, or RRIF.Borrowing from your RRSP should be thought of as borrowing from the government. Not only will they demand repayment, but they have huge sticks to bash you on the head if you don't.
Leslie ... you are misunderstanding some things ... there may be some defective analysis floating around that shows it to be a red herring, but a proper analysis does not ... the tax break on contribution is the single biggest reason that the RRSP succeeds in outperforming most other approaches.Don't feel that you are forgoing the tax refund from RSP contributions. That refund is a red-herring in almost all analysis.
That may be the case for some people, but only in a very specific set of circumstances... most people, however, will not fit into that very narrow set of circumstances ... the majority of the population will face a lower tax rate on withdrawals than on contribution ... many people will not only end up with ALL THE INCOME EARNED ON THAT REFUND in their pocket, after tax, to spend as they see fit, but they will also keep part of the original refund ...When you eventually take your $$ out of the RSP you will have all the original tax refund PLUS ALL THE INCOME EARNED ON THAT REFUND taxed away.
I'm not a big fan of this strategy since the interest on the RSP loan is not tax deductible. The refund comes when you do your taxes, not right away. Since you already have $10k in debt as it is, I would not suggest this strategy. Instead, work on paying off your current debt, and contribute to your RSP plan at work to maximize your employer's match. Check into your RPP plan as well, since it may allow your to contribute to it with additional employer matches. It would also be a good idea to get that LOC paid off before you purchase a house. Work on a plan to get that debt paid off as soon as you can. You are making a good salary, and once the debt is paid off, you'll be in really good shape.Is it a good idea to borrow $7000 from by line of credit and buy RRSP with it? Let's say I make a lump payment of this amount, do I get a refund cheque from the government right away, or do I get it at the end of the year?
I will have an extra $900 this Friday. I'm waiting for your replies to determine what to do with it. Thanks a lot!