RRSP at Oaken and First time home buyer program | RRSPs and RRIFs | Discussion forum

It looks like you can put RSP money at Oaken for as short a time as 30 days. Current rate is 1.25 for short term.
https://oaken.com/gic-rates/?gclid=EAIaIQobChMIj6LgioP87AIV0vDjBx09ww0OEAAYASABEgLtyvD_BwE

They don't offer registered savings accounts.

I wouldn't count on being able to break the GIC. I'm pretty sure they would not guarantee that in advance and would direct you instead to the short term deposits. They do have a cashable one year GIC but it pays peanuts and not worthwhile.

Your alternative would be an RSP savings account at a different FI. Beware of possible withdrawal or closing fees. Oaken has no such fees. Fees may not matter if you have a large enough deposit to justify it at a higher rate. However, there is no telling how long a higher rate will last in most cases.

For an RSP, Hubert is the other one that has no fees, currently at 1.3%.
I don't know how big your RSP is, but if it's over 100,000, you will need to be aware of insurance limits. Oaken could accommodate up to 200,000 through its two entities, Home Bank and Home Trust.
But it may be worth your while to pay a fee if you find a rate you like.

Keep an eye on EQ. They are scheduled to offer TFSAs beginning end of this month or so. It's possible they will also offer RSPs soon, but we don't know yet. If so, they will likely offer a very good rate and might not charge a withdrawal or closing fee.

Bear in mind that most financial institutions will penalize you for closing an account within 3 months or so. Check for details. You can get around this by leaving a small amount in the account if necessary.

Happy hunting!

Oaken does offer short term GIC's for RSP's. This is below their short-term GIC rate table:

Short-term GICs are non-redeemable and require a minimum deposit of $1,000. Interest is compounded annually and paid at maturity. Also available as RSP from 90 days, with a minimum deposit of $2,500.

Page 3 of their Home Trust Company RSP form allows one to select a short term GIC, 90 - 364 days.

dwdrajesh said
Hi Guys, after having talked to my 'main' bank, RBC's agent for a mortgage preapproval, as she said, the market is offering me mortgage close to 2% now for buying a house and I have more than 20% for downpayment without taking the RRSP for a first time home buyer, now I am thinking of putting the extra money I have other than the 20% into a sort of mutual fund, which as she said and I googled a bit, offers around 5% if I put it for say 5 years. This is of course not guaranteed, but it made sense when she explained that given the low rates for mortgage now, it would be wise to put money into a longer term mutual fund than putting all on the downpayment if I have more than the minimum 20% I would need in order to avoid paying close to 10k for the CMHC insurance. What do you guys think? Sorry, I am a first time home buyer and an immigrant too, so my financial knowledge here is close to nothing. Thanks a lot guys  

When I bought my house I put as much down as possible to avoid CMHC insurance. My rules if you can borrow at 2% and invest for 2% higher you will do well. Best wishes.

(Oaken needs to improve their rates page, because when you click on the Registered section, the short term rates disappear.)

Now, about the mortgage and the alternative investment possibilities...

You will get a lot of different opinions on this, but here is what I have to say:

You need to remember that the RBC employee is not an objective advisor. She is a sales rep. Her job is to sell the most RBC products that she can, and they pretty well always want you to buy their house brand mutual funds. This includes PH&N funds. This part of what I'm saying is simply a fact.
It doesn't mean the advice is necessarily bad but it's not objective. All she is doing is matching up the money you have with her mutual funds roster. Her JOB security depends on selling these funds, and I am not joking. Your FINANCIAL security depends on you knowing what you need and then finding out who can offer you the best deal for what you need. The sequence is very important.

You noted that the 5% is not guaranteed. That's for sure! Repeat that to yourself ten times before you make any decisions. Not only is the 5% not guaranteed, but your capital, the amount you invest, is not guaranteed either.
I realize you have a long time horizon, but you also have a long time horizon for that mortgage. When and if mortgage rates go up, the stock market will likely go down.
How stretched are you with that mortgage? How secure is your income?
If it were me, I would not invest that money. I would put it into the down payment or keep it as a nest egg if I didn't have enough. Your RBC advisor will be crestfallen, but that's what I'd do.

Others will disagree with this advice as they have absolute faith in the markets. But I would say that, these days, 20% down is nothing, especially in the more expensive or volatile housing markets.
It's the other 80% that you need to worry about.
It's my belief that when you are in the first term of your mortgage on your first house, you should act very conservatively with whatever money you have. Wait until you are ten years into that mortgage, assuming a 25 year amortization, before you invest in anything else. And keep paying it down as soon as you reasonably can.
Yes, you might, or might not, end up with more money if you put it in mutual funds, but don't fiddle around in those early years when things can go wrong and you are stuck with big bills.

You also need to look at what other savings you may have. If you don't have any, then I wouldn't put this extra cash anywhere except in non-registered HISA or very short term deposits. You need cash in case something goes wrong with your house - and believe me, it will. Even if it's a brand new house, you will be putting money into landscaping and the equipment you need and want to run a home and perhaps raise a family.

The RBC person's advice is based on the assumption that, basically, things will not change significantly, that past successes are your guide. But it's not the things that you can predict that are the problem. It's only the things you fail to predict or pay attention to. This year provides a great example. And it's the things you can't or don't predict that you need to provide some insulation against.

Full disclosure: I had a horrendous experience with an RBC rep who sold my then-98 year old mother a totally inappropriate mutual fund last year without my knowledge, and then wouldn't let me, as her Power of Attorney, cash it in when mum needed the cash. My mother has zero understanding of mutual funds, and she has a hearing deficit.
The story is much longer and worse than what I have said, but you need to be aware that it is not their job to recommend what's best for you. That's your job, to find out, to learn, to do the research, and to recognize you are dealing with a salesperson. Their only obligation is to sell RBC products in a way that can be loosely justified as being vaguely appropriate (but not necessarily best - an important distinction as YOU want what's best for you). The person my mother dealt with didn't even sell her something vaguely appropriate. I believe the only reason I was ultimately able to get this situation reversed was because I said I would complain to the Mutual Funds Dealers Association. RBC wasn't scared by the prospect that i would go through their ombudsman process because that is rigged in their favour and they can guess what the outcome will be, but the Mutual Funds Dealers Association is different. I suspect the fact that I even knew about it made them take me more seriously.

Take your time. Consider all the options. As mutual funds go, RBC's aren't too bad, but you can likely find some that are just as good and have lower fees, or an ETF. If you really don't know what all these things are, then this is not the time for you to invest, and definitely not on the advice of RBC. Don't let yourself get starry-eyed over the possibility of 5%. I can see that it is already happening because you have repeated it. You haven't said, "the return might be 4% or 3% or any other number; you are letting yourself absorb her sales pitch.

Pay down your house or maintain a good nest egg to provide a cushion, and spend some time becoming more familiar with the markets. Then, when the time is right, you'll be able to invest with the confidence that YOU are acting in your best interests, whatever that decision may be.

Two other points.
1. My bad experience was with RBC, but the same shenanigans happen at any bank. The "advisors" (sales reps) are all under considerable pressure to sell products.
2. You have some time before you buy your house. Have you shopped around for a mortgage rate? I am not up on them right now, but it's worth looking around and comparison shopping. A small difference adds up. If you find a better deal elsewhere but prefer to deal with RBC, then go back to your rep with the quotes you've been given and ask them to better it or at least match. Mortgages can definitely be negotiated and often are. As with all the questions you have raised, you have to let them know you are not at their mercy, that you have your own power.

dwdrajesh said
Sorry, I didnt get it , why did you mention that if I follow the agent's advice of just putting 20% in downpayment and put the rest of my money in a mutual fund, isn't it a wise decision? ...  

No. I didn't say following that path isn't wise. Also not against seeking investments with a higher return. I am saying I'm from a different school - one which taught me not to invest on borrowed money.

Best of luck

dwdrajesh said

Got it, you mean its better not to take risks with the stock market given this uncertain situation we are in. Thanks  

Everyone is UNIQUE. When I was working I borrowed money at times to invest. I paid off all the money I borrowed. I retired. I pay cash when I want to invest these days. Nothing wrong with each method. If you pay cash then you generally will not over invest. Have fun.

dwdrajesh, folks here have covered it all, the pros and cons, the sales job RBC is giving you about potential returns and the silence about potential losses, but be aware the locals here are pretty much very risk averse so that slants what you'll hear here. You may get very different advice on an investment-oriented forum. At the end you have to suit your own personality, what best allows you to sleep at night and be happy in the day, and then act accordingly.

I paid off my only mortgage by age 30, a very sweet feeling. Then I turned by attention to investing mainly in blue chip dividend-payers. I probably would have ended up with more money if I'd not focused on paying off my mortgage and instead started investing earlier, but my personality at that age dictated I be mortgage-free first. So it's not just an arithmetic decision.

I certainly don't have the confidence in the markets that I did when I was younger, and to me it's never a bad move to get out of debt (template old-guy attitudes) so I'd probably throw every dollar I could against the mortgage if I were you. But, again, you're the only one that has to live with the consequences of your decision so make sure you're comfortable with doing whatever it is you choose.

Bill said
dwdrajesh, folks here have covered it all, the pros and cons, the sales job RBC is giving you about potential returns and the silence about potential losses, but be aware the locals here are pretty much very risk averse so that slants what you'll hear here. You may get very different advice on an investment-oriented forum. At the end you have to suit your own personality, what best allows you to sleep at night and be happy in the day, and then act accordingly.

I paid off my only mortgage by age 30, a very sweet feeling. Then I turned by attention to investing mainly in blue chip dividend-payers. I probably would have ended up with more money if I'd not focused on paying off my mortgage and instead started investing earlier, but my personality at that age dictated I be mortgage-free first. So it's not just an arithmetic decision.

I certainly don't have the confidence in the markets that I did when I was younger, and to me it's never a bad move to get out of debt (template old-guy attitudes) so I'd probably throw every dollar I could against the mortgage if I were you. But, again, you're the only one that has to live with the consequences of your decision so make sure you're comfortable with doing whatever it is you choose.  

Everyone is UNIQUE. I personally had no desire to buy a house that early in my life. Not in an area that I wanted to live. Rent is best. I had a roof over my head. Save. Eventually you save to buy a house in an area you want to live. I know one person that waited until he paid CASH.