RRSP at Oaken and First time home buyer program | Page 3 | RRSPs and RRIFs | Discussion forum

OK.

20% would be 120K.
25% would be 150K.
The difference between them would be 30K.

You said that if you put down 25%, you would have 60K left over from your existing funds.

So, if you put down 20%, instead of 25%, you should have an additional 30K left over, right?

That would make a total of 90K, I think.

Or perhaps you meant that you have 186k total after deducting for legal etc. Is that correct?
That would certainly affect how much you had left over.

CRA is not my bailiwick, I’m afraid. (Not my area of expertise!)

OK. It was the 60K that you mentioned earlier that was wrong, I think. And now we see a much bigger difference between 20% and 25% in terms of what you have left over.

My preference would be for you to just put down the 20%. 66K is a reasonable nest egg, and it seems that it is exactly what you would be able to put into your TFSA by January. In January you will have an additional 6k of contribution room. So, even though interest rates are low, you won't be paying any tax on it, which gives it a boost.

You will, hopefully, have an additional 400-500/month that you will be able to save. I would use that to do one of 3 things:
1. pay for any "extras" that would enhance your life - a vacation, taking a course, buy nicer furniture, etc.
2. Pay down your mortgage. At 500/month, you would have paid down another 30,000 in five years.
3. Increase or replenish your nest egg, especially if inflation hits.
You could even decide to do one thing one month and a different thing another month. This gives you some flexibility in your life. You don't want to be a slave to the mortgage or saving!
I don't have strong feelings about which of these would be best. I think this is where personality, personal goals and comfort level come in.
If it were me, I would probably pay down the mortgage to some degree but also add some to the nest egg which I would raid if there was something I really needed/wanted to buy and could afford. If you do have some expenses, the nest egg will need replenishing.

Some might say you could get by with a smaller nest egg and put more into the down payment. You could do that and it might work out fine. The standard advice used to be that you should have 3 months of your regular income covered by your nest egg, but I think six months is more realistic now. But that is only enough to sustain you. It doesn't cover the unexpected - your major appliances die at the same time because they were bought at the same time, the roof needs replacing, the basement floods, etc. If it were me, I would probably want an even higher nest egg. I'd like 100K, but that's not realistic for you and you can probably do OK with 66K. It's more than most people have if statistics are to be believed.

As to the TFSA itself, I would keep half in HISA and half in small one-year GICs at Hubert which can be cashed if needed. You should read up on the ins and outs of TFSAs. It's not that difficult but it does have to be learned. There are penalties if you do it wrong.

Save the stock market investing until you are past this first five year term on your mortgage, then revisit it. Personally, I would wait ten years.

For now, I would forget about further RSP contributions. I would get the debt (mortgage) down to reasonable levels first, so that you know you could carry it even if you had to take a lower paying job.

Renting out your extra space from the beginning is also a possibility and will help the mortgage move down faster. You will have to declare it as income (minus expenses), but you can still make some on it. You may not want to do this. You may just want to save it as a rainy day option. Not all tenants turn out to be nice people. It's up to you.

I hope these ideas are helpful.

dwdrajesh said

Thanks Norman1. I paid 12k in federal tax last year, so this 5k credit sounds like significant. At least, I wont have to worry about putting money into RRSP this year to bring down my tax bracket, correct?

Careful: The $5,000 Home Buyers' amount is a federal amount and not a deduction or a federal tax credit.

Amounts are multiplied by 15% to calculate the actual tax credit. So, the $5,000 Home Buyers' amount is a $5,000 x 15% = $750 credit towards federal income taxes. There is no change to taxable income (line 26000) or tax bracket (line 39 in Part B – Federal tax on taxable income) as the credit is applied after they, taxable income and the tax bracket, are determined.

dwdrajesh said

And I thought you were from the GTA area LOL, I m not from GTA though. Yeah its a crazy market out here, at least a 100k increment from the last year. About the realtor too, again, there seems to be a catch that they get a certain % of commission from the seller, so it seems as though they say they are representing the buyer, they might act on the seller's interest since the selling price would determine their commission.  

Yup! GTA.

About the realtors. It's not exactly what you think.
Various geographical areas have governing bodies that exercise some discipline and rules over realtors. In Toronto, it's the Toronto Real Estate Board. You can probably look up the rules that govern your local realtors.
Many are sleazy, of course, so it's important to choose carefully. Interview them. Get referrals from friends. Don't sign up for them to be your sole agent until you are sure.

Within reason, they don't care that much about the price. It has to be a big jump in price in order to seriously impact their income. They'd rather just get on with selling the next house, where they can make more money. An extra 10K may mean a lot to you as a buyer but it doesn't mean much to them because they only get maybe $200 of it. (I'm not sure of the exact rates right now but it would be in that range.). The brokerages also get a cut.

You should check on the rules in your community, but generally realtors are required to be clear about who they are representing. Representing both buyer and seller is tricky although it may be permitted.

This is why you need to get your own realtor. If you don't, you are at the mercy of the seller's agent, who is working both sides of the table, knows how much the seller really wants and knows how much you would spend.
YOUR realtor will be obliged to represent only you and should be scouting the listings for you and bringing suitable listings to you for your consideration. If you just go around hunting down ads on realtor.ca, you will have to deal with the listing (selling) agent.

The listing agent and the buyer's agent each get part of the commission, as do their brokerages. If it's only one person, they make more money!