Author Topic: Payback first time homebuyers loan or invest in non-reg accounts?  (Read 957 times)

erp

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Hi all, I'm approaching the point where I'll have maxed out my TFSA and RRSP in the next year or so. This seems like a pretty good place to be, and I'm thankful to all the more active forum members for giving good advice over the years.

I bought a house a few years ago and took a 25k loan from my RRSP via the first time home buyers program. I can pay (myself) back early, or I can invest that money in my non-registered account. Either way it will be the same ETFs as per my asset allocation. Is there a rule of thumb to determine whether the tax deferred growth in my RRSP would be more effective than the capital gains growth in non-reg? My gut feeling is that non-registered is better, but the assumptions are pretty important for 20+ years out.

Thanks,

FIRE Artist

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Re: Payback first time homebuyers loan or invest in non-reg accounts?
« Reply #1 on: April 12, 2018, 12:32:12 PM »
rule of thumb?  Capital gains are 100% taxable upon withdrawal from an RRSP, 50% taxable from a non-registered account.

I would go the non-registered route, but beware that taxes are owed on the dividends that are spun off in the year they are paid out. Dividends are 100% taxable, but some Canadian dividends are eligible for the federal dividend tax credit.  This is why asset location is critical for a tax optimized portfolio.  You should purchase your Canadian fund ETF allocation in your taxable account as first priority.   

RichMoose

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Re: Payback first time homebuyers loan or invest in non-reg accounts?
« Reply #2 on: April 14, 2018, 10:30:01 PM »
You're correct... Non-reg is better. You can use swap ETFs to be very tax efficient. HXS.TO for US stocks and HBB.TO for bonds.