Rant: Im 25 and I dont qualify for the First-time home buyers plan.

[ronny1980]

5 Years ago my parents bought a condo in Mississauga under my name. I lived there myself for a few months while I was on coop term and then rented it out afterwards.

About 2 years later my parents told me they changed the house back to their name which I didnt care at all.

Today I went to the bank to setup my monthly contributions to RRSP so that I can purchase a house in 3 years using the First-time home buyers plan.

Well I just found out that the condo is still under my name and therefore theres no way I can qualify for the plan in 3 years even if we sell the condo now. (correct me if im wrong...please....)

I still should be able to save enough for downpayment but it wont be thru rrps so I wont get any of the benefits with first-time home buyers.

Im a little ticked off right now.

Advice?

[Rehan]

Tell CRA that it wasn't really your condo. ;)
It's not the fault of the Home Buyer's Plan or CRA...blame your parents for tax evasion.

I still should be able to save enough for downpayment but it wont be thru rrps so I wont get any of the benefits with first-time home buyers.The main advantages to putting money into an RRSP for the purpose of taking it out for the HBP plan are:
1) earlier tax credit for the RRSP contributions
2) tax-free growth while money is in the RRSP

So if those are not a big deal for you, then don't sweat it.

[Roninvancouver]

Tell CRA that it wasn't really your condo. ;)
It's not the fault of the Home Buyer's Plan or CRA...blame your parents for tax evasion.



:lol:


Don't sweat it - just report your parents to the confidential snitch website with the CCRA.

http://www.cra-arc.gc.ca/menu-e.html

[justlooking]

The first time home owner's plan doesn't have any real benefits, other than giving you the ability to take money out of your RRSPs to buy your home. You still have to put that money back into your RRSPs within at 15 year time frame. From what I've read (don't remember the source), but it's not suggested to take the money out of your RRSP to do this.

So I suggest saving some in your RRSP and some outside of it for you home. The real benefit that you're going to get is when you sell the condo (it is in your name!) and use that as the down payment on your home. ;)

[tkl]

The first time home owner's plan doesn't have any real benefits, other than giving you the ability to take money out of your RRSPs to buy your home. You still have to put that money back into your RRSPs within at 15 year time frame. From what I've read (don't remember the source), but it's not suggested to take the money out of your RRSP to do this.

So I suggest saving some in your RRSP and some outside of it for you home. The real benefit that you're going to get is when you sell the condo (it is in your name!) and use that as the down payment on your home. ;)

Yup. The plan is helpful for people who may not have the downpayment avail but have some money saved up in the RRSP. Paying it back is no fun.

If you are able to put money aside, then it's simply a matter of putting that money aside elsewhere other than your RRSP for your home in the future.

[danfromwaterloo]

The first time home owner's plan doesn't have any real benefits, other than giving you the ability to take money out of your RRSPs to buy your home. You still have to put that money back into your RRSPs within at 15 year time frame. From what I've read (don't remember the source), but it's not suggested to take the money out of your RRSP to do this.

So I suggest saving some in your RRSP and some outside of it for you home. The real benefit that you're going to get is when you sell the condo (it is in your name!) and use that as the down payment on your home. ;)

Doesn't have any real benefits? You put money into your RRSP and get tax money back for doing it...I'm getting ~3.5K back for putting 10K in my RRSP for this reason. THEN, you take the money out and repay it over 15 years (like a interest-free loan) which gives you more tax back for doing so.

You'd have to be insane NOT to do this...if you max out your HBP program, you'll be getting an additional 14K back in taxes (tax saved on 20K depositing, taxes saved on 20K repaying = approx 14K, depending on salary).

Edit: Also, if you max out your HBP, then 20K over 15 years = 1.3K a year. That's like a hundred bucks a month.

[Rehan]

THEN, you take the money out and repay it over 15 years (like a interest-free loan) which gives you more tax back for doing so.Wrong. You get no tax credits for your HBP repayments.

[justlooking]

Doesn't have any real benefits? You put money into your RRSP and get tax money back for doing it...I'm getting ~3.5K back for putting 10K in my RRSP for this reason. THEN, you take the money out and repay it over 15 years (like a interest-free loan) which gives you more tax back for doing so.

You'd have to be insane NOT to do this...if you max out your HBP program, you'll be getting an additional 14K back in taxes (tax saved on 20K depositing, taxes saved on 20K repaying = approx 14K, depending on salary).

Edit: Also, if you max out your HBP, then 20K over 15 years = 1.3K a year. That's like a hundred bucks a month.

Can this really be true?! Are you tell me that you can double dip on the refund for your RRSPs? If this is the case, then it's news to me. My understanding is that the money going back in to repay the loan should not be counted against your RRSP contribution.

[danfromwaterloo]

Wrong. You get no tax credits for your HBP repayments.

I just looked on the CCRA site, and it says nothing that leads me to believe that that is correct. You designate each year your contribution of your annual RRSP contribution to the repayment of your withdrawl. It says nothing that this redeposit is excluded from your tax credits.

[devious9191]

I just looked on the CCRA site, and it says nothing that leads me to believe that that is correct. You designate each year your contribution of your annual RRSP contribution to the repayment of your withdrawl. It says nothing that this redeposit is excluded from your tax credits.

http://www.cra-arc.gc.ca/tax/individuals/topics/rrsp/repayments/howmuch-e.html

You can't claim RRSP repayment amounts as tax credits.

Edit: Wrong link..

[Rehan]

I just looked on the CCRA site, and it says nothing that leads me to believe that that is correct. You designate each year your contribution of your annual RRSP contribution to the repayment of your withdrawl. It says nothing that this redeposit is excluded from your tax credits.Take a look at lines 6 to 9 (http://www.cra-arc.gc.ca/E/pub/tg/5000-g/5000-g-10-04e.html#P698_98588) of Schedule 7 (http://www.cra-arc.gc.ca/E/pbg/tf/5000-s7/5000-s7-04e.pdf). The guide for that form says: "You cannot deduct any RRSP contribution you designate as an HBP or LLP repayment on Schedule 7."

[justlooking]

Take a look at lines 6 to 9 (http://www.cra-arc.gc.ca/E/pub/tg/5000-g/5000-g-10-04e.html#P698_98588) of Schedule 7 (http://www.cra-arc.gc.ca/E/pbg/tf/5000-s7/5000-s7-04e.pdf). The guide for that form says: "You cannot deduct any RRSP contribution you designate as an HBP or LLP repayment on Schedule 7."
That's what I thought, otherwise that would of been a big loop hole. I still believe in contributing to an RRSP but it's not the be all end all solution. If you can save enough outside of your RRSP for a home, then it's better to do that than dipping into the RRSP.

[danfromwaterloo]

Take a look at lines 6 to 9 (http://www.cra-arc.gc.ca/E/pub/tg/5000-g/5000-g-10-04e.html#P698_98588) of Schedule 7 (http://www.cra-arc.gc.ca/E/pbg/tf/5000-s7/5000-s7-04e.pdf). The guide for that form says: "You cannot deduct any RRSP contribution you designate as an HBP or LLP repayment on Schedule 7."

Sorry, mea culpa.

[GreenWeenie]

Doesn't have any real benefits? You put money into your RRSP and get tax money back for doing it...I'm getting ~3.5K back for putting 10K in my RRSP for this reason. THEN, you take the money out and repay it over 15 years (like a interest-free loan) which gives you more tax back for doing so.I'm going to hit the point that no one else has. It's not like an interest free loan... you are losing interest (or capital gains) by taking the money out of your RRSP. Your loan is effectively at whatever rate of return your RRSP earns.

To show my point, let's say you have $10,000 in your RRSP. Option (1) is to borrow from your RRSP. Option (2) would be to borrow from "elsewhere". Assume we pay it back at the end of one year (to keep things simple)

Scenario (a) Your RRSP earns 5%, and your loan costs 10%

For option (1) at the end of one year, you pay back the 10,000 into your RRSP.
Change in assets from begining of year: $0

For option (2) at the end of the year, you pay back the 10,000 to "elsewhere", plus $1,000 in interest.
Your RRSP has increased in value from 10,000 to 10,500, but you have had to pay $1,000 in interest.
Change in assets from beginning of year: -$500

Obviously, in this case you are better to borrow the money from your RRSP.

Scenario (b) Your RRSP earns 15%, and your loan costs 10%

For option (1) at the end of one year, you pay back the 10,000 into your RRSP.
Change in assets from begining of year: $0 (same as above)

For option (2) at the end of the year, you pay back the 10,000 to "elsewhere", plus $1,000 in interest.
However, your RRSP has increased in value from 10,000 to 11,500. After you have had to pay $1,000 in interest:
Change in assets from beginning of year: +$500

Obviously, in this case you are better to borrow the money from your "elsewhere".

In theory, if loan interest rates are higher that what you think you can earn with your RRSP, you should borrow from the RRSP. Otherwise, borrowing the money "elsewhere" makes much more sense.

In reality... many times you don't have the option to "borrow elsewhere" so the RRSP route is the only one available.

[grant]

Why not just keep the home that's already in your own name, or sell it... then you don't need a down payment.

[deep]

Is it too mercenary to ask your parents to reinvest a portion of their savings (through you) in YOUR new home, since you already made a considerable contribution to their condo?

I realise it sounds harsh, but in reality it's no worse than what your parents did to you.

[ronny1980]

To be honest I aint really mad at my parents. Was kinda ticked off to begin with but hey...they are still my parents right?

I have 2 younger brothers and 1 younger sister..none of us have any debts...no osap, no car debts nothing - all taken care of by my parents.

They bought us our cars....paid all our bills....they even took care of all our credit card debts at one point because they wanted to give us a fresh start.

So instead of thinking what my parents owe me....I should really think how I should repay my rents for all they have done.

I guess I will just need to work a little harder and make a little bit more money.

O well...***** happens...life goes on... Im still a happy guy :)

But thanks for all your info tho...i will just need another way to save up for my house.

[eliteblaze]

you got a free Mazda 6 GT? wtf did you even make this post. I doubt.. doubt.. unless you're buying a multimillion dollar house through some other loophole that you're savings from lower interests vs. lower rrsp gains will amount to even a downpayment on the car!

I had to pay for even my own licence...

[deep]

To be honest...

(Coles notes - "I have it WAYYYYY too good!" :))

...to save up for my house.

After reading that, I'm sorry I even mentioned it. You need to grovel before your parents, kiss their collective ass and call it ice cream, and not worry about your RRSP. :)

[TrevorK]

Is it too mercenary to ask your parents to reinvest a portion of their savings (through you) in YOUR new home, since you already made a considerable contribution to their condo?

I realise it sounds harsh, but in reality it's no worse than what your parents did to you.

Technical that is fraud since you are supposed to declare all your borrowed sources of income.

Not saying they're going to find out, but if you told them the downpayment was a loan from your parents they may disqualify you from getting a mortgage.

[Sylvestre]

While I agree with this, you have to consider the appreciation value of your house. eg, if you did borrow the money (which was making say 7%) and use it to purchase a house (which appreciates @ 8%) then technically the house is a better investment.
Using your rrsp cash to finance a house isn't just a matter of taking money out of an investment, it's technically changing eg. from mutual funds to real estate.
Now typically real estate doesn't have that good of a rate of return compared to other investments, but you can't ignore it.


I'm going to hit the point that no one else has. It's not like an interest free loan... you are losing interest (or capital gains) by taking the money out of your RRSP. Your loan is effectively at whatever rate of return your RRSP earns.

To show my point, let's say you have $10,000 in your RRSP. Option (1) is to borrow from your RRSP. Option (2) would be to borrow from "elsewhere". Assume we pay it back at the end of one year (to keep things simple)

Scenario (a) Your RRSP earns 5%, and your loan costs 10%

For option (1) at the end of one year, you pay back the 10,000 into your RRSP.
Change in assets from begining of year: $0

For option (2) at the end of the year, you pay back the 10,000 to "elsewhere", plus $1,000 in interest.
Your RRSP has increased in value from 10,000 to 10,500, but you have had to pay $1,000 in interest.
Change in assets from beginning of year: -$500

Obviously, in this case you are better to borrow the money from your RRSP.

Scenario (b) Your RRSP earns 15%, and your loan costs 10%

For option (1) at the end of one year, you pay back the 10,000 into your RRSP.
Change in assets from begining of year: $0 (same as above)

For option (2) at the end of the year, you pay back the 10,000 to "elsewhere", plus $1,000 in interest.
However, your RRSP has increased in value from 10,000 to 11,500. After you have had to pay $1,000 in interest:
Change in assets from beginning of year: +$500

Obviously, in this case you are better to borrow the money from your "elsewhere".

In theory, if loan interest rates are higher that what you think you can earn with your RRSP, you should borrow from the RRSP. Otherwise, borrowing the money "elsewhere" makes much more sense.

In reality... many times you don't have the option to "borrow elsewhere" so the RRSP route is the only one available.

[blackhawk]

I dont think you're missing out on anything from the first time home buyers plan (you DONT get two tax free deposits for paying back) and as everyone's said, blame your parents for the earlier financing/ownership setup.

[MSBP]

Unfortunately, you won't be eligible for the Land Transfer Tax Credit either.

[Ducky]

Unfortunately, you won't be eligible for the Land Transfer Tax Credit either.

can you elaborate on this land transfer tax credit? how does it work? how much? any links?

[mrmoe]

you helped them out.
now ask them to hekp you out with a downpayment.