Posted on: 12-02-09 10:39:33
Hi experts, need your advice/feedback on below questions.
RRSP
Q1. How much money can i put in RRSP account and then borrow as first time home buyer (For myself and my spouse). ? I have heard 20K and 25K, but not sure which amount is correct.
Q2. Lets say the limit is 20K and buyer is in 33% tax bracket, then how much tax advantage he/she will get. Whats the formula to calculate that.
Q3 If spouse is not working then does it make sense to put money in his/her RRSP, will he/she also get any tax advantage. (even though no income).
Utility Bills
Q1. For a 2500 SQFT house, whats the average bills ? Below are the figures given by a co-worker, i just wanted to confirm.
Electricity - $150
Gas - $200
Insurance - 70
Water - 30
Down payment
Q1. I know if i pay less then 20% down then i will have to pay mortgage insurance. Now considering the Real estate market, i am not sure which strategy is good.
i) Give 20% down - (PROS)No insurance premium, less monthly payment, more equity, good interest rate.
(CONS) - Less money left in bank (might need in emergency), if property prices goes down your equity also goes down, incase of foreclosure (God forbids) you will have more to lose.
I want to know what strategy will you use and why ?
Quote:
Originally posted by kabutar12
Hi experts, need your advice/feedback on below questions.
...........
I want to know what strategy will you use and why ?
Hi,
I will try to answer these questions. Please see my responses in bold.
RRSP
Q1. How much money can I put in RRSP account and then borrow as first time home buyer (For myself and my spouse). ? I have heard 20K and 25K, but not sure which amount is correct.
A1. The limit under HBP previously was $20,000 each spouse. However, with the new budget proposal, after 27th January, 2009 the limit has been increased to $25,000 each spouse.
Q2. Lets say the limit is 20K and buyer is in 33% tax bracket, then how much tax advantage he/she will get. Whats the formula to calculate that.
A2. Rough calculations would say that you would save around $6600 but it is not that easy and depends on other factors as well. If you put 20,000 and you are in 33% MTR, you would save $6,600 or more.
Q3 If spouse is not working then does it make sense to put money in his/her RRSP, will he/she also get any tax advantage. (even though no income).
A3. Yes, it definitely does. This is an effective way of income splitting. Your financial advisor can help you in understanding this better
Utility Bills
Q1. For a 2500 SQFT house, what’s the average bills ? Below are the figures given by a co-worker, I just wanted to confirm.
Electricity - $150
Gas - $200
Insurance - 70
Water – 30
These expenses depend on your own usage but the figures given by your friend are in line with this size of house. May be Gas would be a little lower than $200.
Down payment
Q1. I know if I pay less then 20% down then I will have to pay mortgage insurance. Now considering the Real estate market, I am not sure which strategy is good.
I) Give 20% down - (PROS)No insurance premium, less monthly payment, more equity, good interest rate.
(CONS) - Less money left in bank (might need in emergency), if property prices goes down your equity also goes down, incase of foreclosure (God forbids) you will have more to lose.
I want to know what strategy will you use and why?
It depends on individual’s thinking and circumstances. This decision has to be taken by the individual only after taking in to consideration of his/her risk tolerance and job security. Every one else would give you same pros and cons of both options and can advise you accordingly but the decision has to be taken by yourselves only. However, if I were in this dilemma, I would put 20% down and go for an All in One Type of account or pure secured Line of Credit only so that I have the flexibility of payments and can have access to funds in emergency.
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
Thanks a lot Pramod Ji.
Water bill will be more than 30 in summer when you do the lawn.
If you are in GTA then 180 is good for gas in winter.
electricity can be 100
Again dont forget gas bill will be <50 in summer
Dont froget security system. I also add newspaper to this expense.
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Live and Let Live
