# RRSP HBP vs. TFSA



## cynbad (Feb 20, 2012)

I'm in the process of purchasing my first home. I need to either borrow $25,000 from my RRSP or take the money out of my TFSA. I have sufficient funds in both. I've been reading some articles and trying to make sense of it all, but I'm unsure of which direction to take. I'm of two thoughts - use the RRSP as this will be the only time that I'll be able to withdraw from it tax-free, but I hate the thought of having to pay it back OR take the money out of my TFSA and top it up again when I have the funds available. Or, how about a combination of both? Any advice would be greatly appreciated.


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## rd_aaron (Jun 24, 2011)

Do you have $25,000 in contribution room in your RRSP? Move your TFSA into your RRSP for 3 months before you close, and then use the HBP. If you do it right now, you'll get your refund before you close on your house, and you'll have $25,000 + refund = total down payment.


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## HaroldCrump (Jun 10, 2009)

I don't like/understand the benefit of transferring TFSA into RRSP and then withdrawing from the RRSP as HBP.
Don't let the tax "refund" influence your decision.

After your home purchase is done, you will end up with an empty TFSA and an annual liability towards your RRSP for paying back the HBP loan.
You will be stuck with paying back your RRSP, and your TFSA might languish for several years.

IMO, the best option is a straight HBP loan from the RRSP.


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## Charlie (May 20, 2011)

I think you're marginally better taking the HBP. You're giving up the 'tax free compounding' in either case but with the TFSA that income comes out tax free in time, whereas in the RRSP it would be taxed. The payback commitment for the HBP isn't really a big deal. Worse case, you could tap the TFSA for that and then you're no worse then if you'd gone TFSA from the start.

The other advantage is that it leaves you flexibility to tap the TFSA later if you needed to (though those funds are supposed to be for retirement). Possibly both is the best answer if both allows you to avoid CMHC insurance.

But I think it's pretty close. And personal preference may rule the day.


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## Echo (Apr 1, 2011)

Another option to consider is that if more of a down payment means you'll avoid or reduce CMHC fees then why not use the funds from both?


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## cynbad (Feb 20, 2012)

I have $110,000 to put down already but want to include another 25,000. I think I'm going to use the HBP so I can still use my TFSA for emergencies or unexpected home repairs. Thanks everyone for your input!


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