Paying for a house with RRSP or other

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Vanmax
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Paying for a house with RRSP or other

Post by Vanmax »

Hello,

We own the house we live in, fully paid, but would like to upgrade to a larger house.
We have been fortunate with our investments and have a sizable amount in our RRSP. Enough to upgrade our house and retire off the rest.
Currently employed but contemplating early retirement someday, hopefully sooner rather than later.

Questions:
1. What is the best way to pull money out of the RRSP to pay for the house upgrade? Sounds like a lump sum is the main method but obviously tax implications will bite into it severely. Can we hold a mortgage with our RRSP to spread out the withdrawal rate? Can we qualify for a loan using the RRSP as collateral or is it not allowed? Possibly we should take a loan while still employed?

2. We've never used a financial advisor. Dropped my regular stock broker years ago. Who would be best type of pro qualified to consult us on matters like this? An accountant, tax consultant, or who? Really haven't had a chance to look into what's available out there. Seems like many financial advisors are 'cookie cutter' about investments but don't really get into advice like this.

I've been so consumed with work and investments in the past many years I never looked into getting professional advice. Embarrassing now I'm not prepared for the next step.

Thank You for your suggestions!
Spudd
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Re: Paying for a house with RRSP or other

Post by Spudd »

Your RRSP can lend you the money for your house.

http://www.moneysense.ca/columns/loan-y ... -mortgage/

You could also consider just getting a regular mortgage and pay it back by withdrawing from the RRSP.

A lump sum withdrawal from the RRSP would be highly taxed so is probably not the best option.

I don't know what type of advisor to recommend so will defer on the second part of your question.
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patriot1
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Re: Paying for a house with RRSP or other

Post by patriot1 »

Vanmax wrote: 10 Oct 2017 14:40 1. What is the best way to pull money out of the RRSP to pay for the house upgrade?
The RRSP home buyers plan allows you to take out $25K tax free with repayments over 15 years. More than that has to be an ordinary taxable withdrawl. Actually I'm not sure if someone who already owns qualifies.
Can we hold a mortgage with our RRSP to spread out the withdrawal rate?
You can hold a mortgage on your own house in your RRSP but it must be at commercial rates and be insured so it doesn't get you lower payments than just borrowing the money.
Can we qualify for a loan using the RRSP as collateral or is it not allowed?
Definitely not allowed. Using an RRSP as collateral is treated as a taxable withdrawl.
Possibly we should take a loan while still employed?
Are you planning to upsize your house on the verge of retirement? What for?
Vanmax
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Re: Paying for a house with RRSP or other

Post by Vanmax »

Thanks for the replies.

Why a bigger house before retirement? It's early retirement planned. Still have young kids. Could use a bigger house.

Don't believe you can use the HBP if you already own a house. We are looking at much more money than the plan covers anyway.

Holding mortgage in my RRSP. Understand it needs to be at real interest rates, should be no issue. However, wonder if I need to qualify for the loan with my income, which goes back to me having to qualify for the loan while I'm still employed.

Just as I thought, can't use RRSP funds as collateral. So I would need to qualify for a huge mortgage. Maybe I do that before I give up my job. Otherwise I would need to pull out a big chunk of $ from my RRSP and get hit with a whopping tax bill. Haven't done the math myself but I was thinking all my future big purchases like house & car would be financed to lower the tax bill. Of course, if I withdraw a large amount each year then it might not make a big difference. Will need to do a lot of math but I'm fairly certain of the outcome.

This is why I could use some good professional advice. A bit of an unusual situation. Don't want to "blow it" by doing something semi-catastrophic like quitting my job before I qualified for a loan that would have helped me save a pile of tax by spreading out the house cost over many years.

Any other suggestions would be greatly appreciated. Thank You
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