As Good As SOLD

A first-time home buyer?

August 1st, 2007

I came upon a site on the net recently that featured a calculator that purported to help prospective buyers decide if they should rent or buy. Now there may be some markets where that is a legitimate question, but I say with great humility that my street isn’t one of them. My neighbour bought three years ago Christmas for $375,000 — and just sold it for $808,000.

Don’t wait to buy real estate. Buy real estate and wait.

That said, what are some of the vehicles available to first time buyers to help them break into this daunting market? The Home Buyer’s Plan, for one. The taxman will allow both you and your spouse to withdraw $20,000 tax free from your RRSPs towards a home purchase providing you haven’t owned one in the last five years. The amounts you borrow have to be repaid in equal installments over 15 years, commencing in the second calendar year after the withdrawal, but if you fail to repay the amounts to your RRSP it becomes a taxable liability.

There is a downside other than the drag of having to repay, however: it could impinge on your ability to make full RRSP contributions since you may now have a reduced cash flow.

Bottom line? My inclination would be not to disturb your RRSPs for this or any other purpose unless you absolutely have to. Retirement will come soon enough; meanwhile, the banks are practically giving mortgage money away. Use theirs — even if it is lent to you over 40 years.

Entry Filed under: Real Estate Matters