# Got a $10k bonus, should i put it in a TFSA or Margin account?



## Hustler (Apr 10, 2015)

Right now I'm saving to put a down payment on a house, maybe 8-12 months from now. I came onto $10 extra that I can put to the side for the down payment, but instead of holding cash I want to invest it because i think the market will appreciate. I have two accounts at Questrade, a 3x Margin and TFSA. If I put the money in an TFSA, I will withdraw it when buying the house. If I don't I don't expect to make any other contributions to my TFSA. Which one makes more sense in my situation?

Also is my TFSA limit carried over to next year? If I deposit and withdraw this cash, would I lose potential future contribution I could've otherwise made?

I'm also in a low tax bracket.


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## OnlyMyOpinion (Sep 1, 2013)

Put it in the TSFA, then you can take the $10k and its earnings out tax free in a year for your down payment. You can put that amount back in the following calendar year. Put it in a 1 yr GIC at the best rate you can get. Putting it into the market now (after several years of increases) is folly - unless you really don't mind the risk having only $9k, or $8k, or $6k? when it is time to use for your down payment.


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## My Own Advisor (Sep 24, 2012)

TFSA. Your future self will thank you.


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## PrairieGal (Apr 2, 2011)

I would put it in a People's Trust TFSA at 2.5% unless you can find a better rate for a 1 year GIC. Like OMO said, are you really going to be OK if the value of your funds is lower when you need it in a year for your down payment? 

You don't lose your contribution room when you make a withdrawal (unlike RRSP's), just make sure you don't put the money back until the following year or you will get penalized.


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## Westerncanada (Nov 11, 2013)

Would no one suggest placing the funds in an rrsp and utilizing the Home Buyers Plan? 

Assuming you maxed out the 25k amount you should trigger a large refund in march 2016 that could be used for additional funding towards the house and then use the full 25k down in the rrsp tax deferred? 

I am not suggesting the TFSA is the wrong plan but curious on which is factually better for this sort of plan.


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## Eclectic12 (Oct 20, 2010)

I avoided mentioning it as it adds either a second loan (i.e. paying back the HBP withdrawal) where one pays it back or increases one's taxes (where one does not pay it back).

Given that the OP seems willing to bet one the direction the market is going to move while not being fully aware of the TFSA rules ... a second loan seems risky.
There is no indication of what other money is around or what it is invested in ... just the $10K windfall.


Where one is sure they can handle the second loan that a HBP withdrawal generates plus expenses plus whatever happens with interest rates ... it is a choice to look at. One does give up the investment growth in the RRSP until the HBP withdrawal is repaid.


Cheers


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## My Own Advisor (Sep 24, 2012)

Westerncanada said:


> Would no one suggest placing the funds in an rrsp and utilizing the Home Buyers Plan?
> 
> Assuming you maxed out the 25k amount you should trigger a large refund in march 2016 that could be used for additional funding towards the house and then use the full 25k down in the rrsp tax deferred?
> 
> I am not suggesting the TFSA is the wrong plan but curious on which is factually better for this sort of plan.


I'm not a big fan of the HBP. I need to write a post about this. A home is not a retirement plan. RRSP should not be raided for a home purchase. This is what HISA and TFSA is for. Just my $0.02 of course!


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## Guban (Jul 5, 2011)

Eclectic12 said:


> I avoided mentioning it as it adds either a second loan (i.e. paying back the HBP withdrawal) where one pays it back or increases one's taxes (where one does not pay it back).
> 
> Given that the OP seems willing to bet one the direction the market is going to move while not being fully aware of the TFSA rules ... a second loan seems risky.
> There is no indication of what other money is around or what it is invested in ... just the $10K windfall.
> ...


If the investment growth is a concern, just borrow the same amount that was taken out under the HBP, and invest it. Voila, the total amount borrowed is the same, the investments owned is the same *and* the HBP amount becomes tax deductible. Under this method, the loan payments do not fall (as they would without the investment loan), and the growth is not lost. It is, of course, riskier complared to a straight HBP withdraw because the overall loan has been reset to the original mortgage amount. Investments can be sold/transfered in kind back into the RRSP as HBP repayments are required.

I don't get why My Own Advisor doesn't like the HBP. Look forward to reading about it in his blog.


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## Westerncanada (Nov 11, 2013)

Please do  I recently found out you can use hbp for primary residence as long as you have not had a mortgage in 5 years... and to me, HBP is just cheap money . 

I am also in a very high bracket which means I would trigger a large refund.... but interested to hear your perspective


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## My Own Advisor (Sep 24, 2012)

The HBP is not really cheap money....you are borrowing from your future self.

First, since when is home ownership equivalent to a retirement plan? I don't see it myself. I prefer to be asset rich and house modest. 

Second, buying now (a house) is somewhat contradictory to what the RRSP account is for (withdraw later).

Third, this is for your first home only. This is an incentive plan only to get young homeowners into real estate. Folks should question why this is not available for secondary home buyers. Just sayin 

Fourth, money that is contributed to an RRSP plan repaid for the amount borrowed from the Home Buyers’ Plan does not count towards any tax credits. This means you do not get another “refund” for contributions. 

There are more issues. Does the HBP have benefits? Yes. I see more downsides though. Again, just my $0.02.


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## none (Jan 15, 2013)

My Own Advisor said:


> There are more issues. Does the HBP have benefits? Yes. I see more downsides though. Again, just my $0.02.


You're dating yourself mark. You have to say at least $0.03 or it gets rounded down to zero.


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## My Own Advisor (Sep 24, 2012)

none said:


> You're dating yourself mark. You have to say at least $0.03 or it gets rounded down to zero.


LOL

Does $0.05 work?


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## Eclectic12 (Oct 20, 2010)

Guban said:


> If the investment growth is a concern, just borrow the same amount that was taken out under the HBP, and invest it... It is, of course, riskier complared to a straight HBP withdraw because the overall loan has been reset to the original mortgage amount...


Yes ... three loans to be paying is definitely riskier. 




Guban said:


> Investments can be sold/transfered in kind back into the RRSP as HBP repayments are required.


Investments that have stayed even or grown ... yes.

I`m thinking that someone who does not have the TFSA rules down pat (no offense but they are simple) probably doesn`t have a rock solid investment strategy. YMMV - like so many other things.


Cheers


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## Guban (Jul 5, 2011)

Eclectic12 said:


> Yes ... three loans to be paying is definitely riskier.
> 
> Investments that have stayed even or grown ... yes.


3 smaller loans for a total value of the one large mortgage ... One to yourself (HBP - and you are not paying the bank interest) and one tax deductible!

Aren't you assuming that the investments will grow if your objection is that you'll lose the growth in the RRSP? If you want to play it safe, don't leverage, and just borrow less from the bank. Keep the mortgage interest that you would have paid the bank, and add it back to the RRSP, along with the HBP repayment. That'll represent the "lost" growth.


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