Author Topic: Home buyers plan  (Read 543 times)

Gail2000

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Home buyers plan
« on: November 24, 2018, 10:21:35 AM »
My hubby and I bought a house in 2016. We bought for $210000 and were able to put down $50000. Half that was taken from our rrsp s (Canadian retirement savings). This is a government loophole that first time buyers can repay an amount of up 25000 (penalty free)over a period of 15 years.

This said while it is an interest free loan, I wonder if it is smart as we are loosing out on investment opportunities while reducing our mortgage payment. We have taken advantage of the last years before interest rates went up and currently pay a rate of 2.29. This will change in 2021 when we renew.

What would be the most moustachian move if we were to do it over?

ItsALongStory

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Re: Home buyers plan
« Reply #1 on: November 25, 2018, 08:23:38 AM »
hi,

I would expect the first questions you'll get is to determine if this is the right amount of house for your situation. Once the answer to that questions is established you can move on to see if you have other debt that can be reduced or eliminated and then roll those payments into your interest free loan that has a 7-8% opportunity cost vs being invested in the market.

My understanding of the retirement account loans is insufficient to guide you on what to do beyond that.

ilsy

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Re: Home buyers plan
« Reply #2 on: November 25, 2018, 08:55:29 AM »
The answer depends on how much risk you can tolerate. So, it's very personal. I think that being over leveraged is a huge risk, some people think that using other people money is less risky. I don't know Canadian laws, so I can't suggest anything there (interest free loan? But then you have to "renew?"). I have about 70% equity in my house and some might say that I can invest that in something. Yes, I could, but it gives me a piece of mind to not touch that eqiuty. It might change one day.

Gail2000

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Re: Home buyers plan
« Reply #3 on: November 25, 2018, 06:07:34 PM »
I should mention while there is no charge for borrowing your own money but if the minimum payment is not paid the amount to be paid would be taxed at the appropriate tax rate. We have an income 5200$ monthly so Im not really worried we are stepping out of line with the recommended 25% of household expenses going to mortgage of 604$/ monthly and our payments of taxes of 3200$ and our yearly repayments of 1535$+352$ wrapped up in our %15 retirement savings. Hoping to get that saving rate up this year.