29 Jun 2012

Using retirement savings as a down payment

With the price of Canadian houses on the rise, many homeowners may struggle to make a down payment on the homes they are looking at. For example, the average price of a house in Toronto for May 2012 is $516,787, according to Moneyville.ca. At that price, the minimum down payment would be somewhere around $25,000.

Fortunately, Canadians have an option for assisting with their down payment. The Canadian Home Buyer's Plan allows first-time buyers to take up to $25,000 out of their Registered Retirement Savings Plan (RRSP). However, this money needs to be paid back over time for the buyer to avoid a tax penalty.

For those buying a home with a spouse, the rule allows for both wife and husband to take $25,000 out of their plans. That being said, couples need to be careful about using too much of their RRSP as a down payment. Besides the fact that the money needs to be paid back, it can deplete retirement savings. Still, it's worth it to use the Home Buyer's Plan to ensure the down payment reaches at least 20 percent. At this threshold, buyers can avoid several fees related to their mortgage.

New homebuyers may also want to consider setting aside some money in order to rent at an affordable Toronto self storage facility. This is a cheap way for buyers to increase the amount of space they have to store items.

Jiffy Self Storage, a leader in Toronto storage solutions, is currently running a contest on their website for a free iPad 3. Visitors to the site simply need to match a few Canadian landmarks and they'll be entered to win the iPad or one of several other prizes.

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