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Is using your RRSP to buy your first home a good idea?

Starfish The Gray Team Ucluelet Real Estate

Article from the Toronto Star Personal Finance

If you want to use your Registered Retirement Savings Plan (RRSP) to help buy your first house or condo, you can borrow up to $25,000 in any one year, with 15 years to pay it back.

For younger readers it’s an attractive possibility, because a couple can borrow up to $50,000 for a down payment. The question comes up frequently in email and comments: Should we or shouldn’t we? The answer is, it depends, but even at the top of a housing market, it can make sense as long as you have a clear understanding of the risks.

Dipping into an RRSP via the federal Home Buyers’ Plan reduces the size of your retirement savings, and so the power of tax-free compounding inside. Your RRSP pot will be smaller and grow at a slower rate. Once you have a mortgage, chances are there’s less to spare for an annual RRSP contribution, in addition to the repayment of the sum borrowed. It also converts you from a saver to a spender.

Read more here.

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