Saving for a Home? Read this First.
Is saving for a home at the top of your priority list?
Or maybe you’re feeling like you’ll never get there? If so, you’re not alone. With some of the craziest home prices we’ve ever seen, saving for a down-payment is more important than ever, and trust us, you can get there! Two popular yet simple long-term savings tools are the RRSP and the TFSA.
An RRSP is a great place to start. Using your RRSP to save for a home is recommended because of the “Home Buyers Plan.” Early withdrawals from an RRSP are not encouraged but if you are withdrawing the funds through this plan, an exception is made. It allows you to borrow up to a whopping $25,000 from your RRSP, tax-free! (Now that’s great news). Though to stay tax-free, this amount must be repaid back into your RRSP over a fifteen-year period, so keep that in mind.
The reason why the TFSA is so attractive is because of its flexibility. The TFSA is after-tax income and you can withdraw from it at any time, tax-free. This year, your up-to-date contribution limit is $57,500 tax-free dollars – no small amount when every penny counts towards your new home.
So, which is the best option you’re wondering? The answer depends on your goals and personal situation. If buying a home is your top priority, the Home Buyers Plan will help you maximize your down-payment and give you the most value. Alternatively, if you are early in your career and expect your income to increase, you might be better off to maximize the TFSA option and save the tax deductions available through RRSP contributions until later.
Having a financial planner help you build an actionable savings plan will help to ensure that your dream of home ownership becomes a reality. YOU CAN DO IT!