Keep in mind I'm not arguing against you, merely trying to increase my own understanding
As I said, I wasn't even aware that deferral of RRSP contribution tax credits was an option, so clearly I still have a lot to learn - but I'm still a little unclear on this.
adrian2 wrote:
Your original question was "for a person who's MTR is likely to increase, does the HBP offer any significant advantage over just saving in a TFSA?" which implies one wants to buy a home sometimes in the (near) future.
The HBP is tied, inter alia, to purchasing a home; you cannot compare the HBP with another strategy and say that the HBP cannot be applied to education financing.
What we're really talking about is saving for a house in an RRSP vs a TFSA. My understanding is that money saved in an RRSP can
only be accessed for retirement, a house (HBP) or education (LLP). The TFSA of course does not have this restriction. Circumstances change, it's entirely possible a person may start saving for a house and then reconsider.
Depending on the pre-payment terms of one's mortgage, might a TFSA be better in some cases if it allows the individual to pay down the mortgage more quickly?
You can pay back the HBP as fast as you want (at least the minimum mandated per year). Basically it's a mortgage from yourself allowing for 100% pre-payment.
So I'd say you could not find one reason where saving in a TFSA for a first home purchase would be better than in an RRSP + HBP. The only reason I could think is where one has no RRSP room.
I'm still confused about this. Here come some assumptions and fuzzy math.
Suppose a person has managed to save $50000 for a $250000 house. Assuming a 20% tax credit, person R will have $60000 while person T will have $50000. For the sake of convenience, lets say a 3% mortgage over 25 years. Person R will have to contribute $4000 to their RRSP each year for the first 15 years, person T will instead use that $4000 as their annual lump sum payment.
At the end of 15 years, person R has ~$82000 remaining on their mortgage. Person T has significantly less at ~$22000.
I feel like I must be overlooking something.