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Financing, Mortgages and Insurance What options are best for you and your situation?


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  #1  
Old 2006-11-07, 02:55 PM
maria musselman maria musselman is offline
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Talking rrsp for first house

we are trying to find out from somewhere if we can take money out of our rrsp so we can pay for our upgrades upfront instead of adding it to our mortgage. We asked our stock broker who wasn't exactly sure and our martgage broker who also is looking into to it for us. We know we are allowed to use 20K each for the purchase of our new home if we want. Is there someone out there who can direct us to a web site or someone who knows about the restrictions of rrsp withdrawl (that are in stocks). thank-you
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Old 2006-11-07, 04:10 PM
miko1234 miko1234 is offline
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Quote:
Originally Posted by maria musselman
we are trying to find out from somewhere if we can take money out of our rrsp so we can pay for our upgrades upfront instead of adding it to our mortgage. We asked our stock broker who wasn't exactly sure and our martgage broker who also is looking into to it for us. We know we are allowed to use 20K each for the purchase of our new home if we want. Is there someone out there who can direct us to a web site or someone who knows about the restrictions of rrsp withdrawl (that are in stocks). thank-you
You are allowed to use the 20K in any way you see fit from what I understand. You are not obligated to using the 20K for downpayment.

However, you may want to concider to put the 20K on your mortgage and then give a bigger down payment to your bank when you close. This will allow you to have a bigger down payment and you will save some CMHC fees. Of course this depends on how much you are planning in upgrades.

Remember that the withdrawls from the RRSP must all be made in the same calendar year.

More information is on the CCRA website: http://www.cra-arc.gc.ca/tax/individ...bp/menu-e.html

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Old 2006-11-08, 11:50 AM
willy77nilly willy77nilly is offline
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Yup - like Miko said you can use the RRSP money anyway you want!!

You can use the money towards your downpayment, closing costs or furnishings. When the money is transferred from your RRSP it is transferred directly into your bank account - end of story. You then decide how the funds are allocated. Remember you and your spouse can withdraw up-to $20,000 each.

Here's a couple of additional resources on this topic:

http://www.aimtrimark.com/AIM/Resour...ns/TBHBUYE.pdf

http://www.cra-arc.gc.ca/formspubs/t..._buyers-e.html
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Old 2006-11-08, 01:07 PM
Rowdyruffboy Rowdyruffboy is offline
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As far as I know, you have to put it back in 15 annual payments though. Or else it will be added to your income and you'll be taxed on it.
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Old 2006-11-08, 01:44 PM
Craig & Sophie Craig & Sophie is offline
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Originally Posted by Rowdyruffboy
As far as I know, you have to put it back in 15 annual payments though. Or else it will be added to your income and you'll be taxed on it.
That's correct. You have 15 years to pay it back, but minimum 1/15th of the total each year.
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Old 2006-11-08, 01:57 PM
willy77nilly willy77nilly is offline
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Uhhmm let's see,

$20,000 / 15 years = $1,333 year

Even at a 25% tax bracket that's only $333 bucks if you fail to payback the $1,333 for the year!

SWEET!
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Old 2006-11-08, 02:06 PM
Craig & Sophie Craig & Sophie is offline
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Originally Posted by willy77nilly
Uhhmm let's see,

$20,000 / 15 years = $1,333 year

Even at a 25% tax bracket that's only $333 bucks if you fail to payback the $1,333 for the year!

SWEET!
Yes, but I believe you still have to pay it back in the end. Someone please correct me if I'm wrong.
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Old 2006-11-08, 05:27 PM
willy77nilly willy77nilly is offline
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Smile Clarification

From the Canada Revenue Agency website:

Quote:
If you do not make the repayment for a year, it will have to be included in your income for that year.
Quote:
In the year you make your first repayment and every year
thereafter, you have to complete and send us an income tax
return, until you have repaid all of your HBP withdrawals
or have included them in your income. You have to file a
return even if you do not owe any taxes.
You're expected to pay it back to replenish your RRSP - but if you are not able to for whatever reason it's added to your income for that year. Surely any reasonable person would want to meet and exceed the minimum repayment amount. But if circumstances prevent you from doing so, it's simply added to your income and therefore you would pay the taxes. As I mentioned before this would be a relatively small price to pay!

Mind you, I am no expert in this area - so it's always best speaking to a financial adviser or tax accountant.

Hope this helps!
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Old 2007-12-02, 08:23 PM
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canabiz canabiz is offline
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Hello folks, I would like to bring this thread up and get some feedback (I will check with my banker to confirm everything, just thought I would make a quick post here)

I took out my RRSP as part of the First Time home buyer plan this summer (in July). I was told that I have 20 years to pay it back which works out to about $1,300/year and that's all fine and dandy. Here are a couple of questions

1. When do they consider it the 1st year of the 20-year plan? This year because I withdrew the RRSP in the summer or next year?

2. Is there any penalty if I decide to put in more than $1,300/year, thus reducing the 20-year period?

Thanks
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Old 2007-12-03, 05:24 PM
GreyingJay GreyingJay is offline
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Quote:
Originally Posted by canabiz View Post
1. When do they consider it the 1st year of the 20-year plan? This year because I withdrew the RRSP in the summer or next year?
Next year.

Quote:
Originally Posted by canabiz View Post
2. Is there any penalty if I decide to put in more than $1,300/year, thus reducing the 20-year period?
This isn't like a typical loan. Interest is not charged. In fact, you're really just borrowing money from yourself. For the next 15 years (I believe it's 15, not 20) the first $1,300 you put into your RRSP's are counted towards paying back the withdrawal (and NOT counted toward a tax-deductible contribution). Anything more that you put in is treated as it always has been.

But from what I understand, you can't ask to allocate any more than 1/15th per year.

I imagine the only reason to allocate more initially is if you intend to claim the full benefit of a larger RRSP tax deduction in future years.
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