# First Time Home Buyer's Plan and RRIF



## CanadianQuebecer (Sep 25, 2017)

Hi All,

I am 42 and am probably best classified as someone who is cash rich and house poor. I've been renting all my life, but putting away into an RRSP since I graduated, and subsequently into a TFSA. I was just wondering if it's possible in order to fund my first house purchase, if I can take out money using the HBP, and within a few weeks convert my RRSP to a RRIF. 

I understand that I won't be able to contribute any more, but I have that covered with my wife. I would still be working however. The idea is that I want to pay of the house as fast as possible, but don't want to get hit with too many taxes when I pull from my RRSP regularly. 

Thanks for any ideas.


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## Mortgage u/w (Feb 6, 2014)

There is very little benefit of converting your RRSP into a RRIF at your age. The minimum tax-free withdrawal amount would be negligible. To answer the question though, you will still be obligated to repay your HBP so if you can no longer contribute because of the RRIF, then you will be imposed taxes on the amount you withdrew.

I always found the HBP program deceiving and useless. I would never want to commit to repaying myself for something like a down-payment - the goal is to be debt-free not debt-deferred.

Make your money work for you within your RRSP and keep it for your retirement. Use your TFSA for your down-payment instead.

If you want to liquidate your RRSP, go ahead, even though I wouldn't recommend it. The taxes you will pay at withdrawal will simply be offset by the taxes you deferred when you contributed. Don't look at the HBP as a great program or free money. Anything the government creates is not always in your best interest.


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## Jimmy (May 19, 2017)

HBP is a great program unless you have other options ie $ or loans from relatives. You want to use as much downpayment as possible to reduce the amount of the cost of mortgage insurance. 

If you can reduce your mortgage loan to value from 95% down to 90% you save .9% in insurance ( 3.1% vs 4%) . On a $600,000 mortgage, that means you save $5,400. 

You will need 5% or $30,000 more in downpayment but the return is 5400/30000 = 18% right away.


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## twa2w (Mar 5, 2016)

Here is what will happen if you withdraw 25,000 for the HBP, then convert your RSP to a RIF and do not repay your HBP.
You will pay tax on 3 sources of income. Your job income, your RIF income, and 1667.00 of unpaid repayment of HBP.
Of course you will have a years grace before RIF starts and HBP repayment commence. You will pay tax on the 1667. Of HBP repayment for 15 years.

If you just withdraw the 25,000 from your RSP and leave the rest of your RSP alone you will be required to contribute 1667.00 per year to an RSP and show it as HBP repayment. Or if you don't, then pay tax on an extra 1667,00 unpaid HBP repayment. Of course you may repay your RSP HBP faster if you wish, or alternately, not pay it and ante up the extra tax for 15 years.
Your remaining RSP and any HBP repayments you do make will continue to compound tax deferred.

Using the HBP can be useful if enables you to increase
your down payment enough to reduce or eliminate CMHC insurance fees.
Factors to assess
the tax savings from the RSP contributions prior to HBP 
the savings you get from a smaller mortgage
the loss of compounding from taking from your RSP.
mortgage rate payable with after tax income against the potential earnings tax deferred if left in RSP. 

Yes it can get complex :-(


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