Perhaps you just received a bonus or a big tax refund from the government, how should you make your money work harder to save up for a down payment more quickly?

The government has two popular tax-free programs that can help. Simply ask your local bank or investment advisor about the Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP). Both are great for savings but if your purpose is to use the funds for a down payment, there are advantages and disadvantages. Below is an overview:

Tax-Free Savings Account (TFSA) – Advantages

  • Any growth in your investment is tax-free.
  • There’s a wide range of investment options allowing you to put in or take out money a lot easier
  • Investment in this account does not affect your income taxes.

Tax-Free Savings Account (TFSA) – Disadvantages

  • Contributions do not help lower your taxable income that will result in a higher tax refund.

Registered Retirement Savings Plan (RRSP) – Advantages

  • Any growth in your investment is tax-free.
  • The amount put into RRSP will decrease the same amount of the income you file for taxes. You can only withdraw up to $25,000 and only if you are a first-time home buyer.
  • Using RRSP for a down payment is only available for first time home buyers. You can use up to $35,000.

Registered Retirement Savings Plan (RRSP) – Disadvantages

  • Putting money in RRSP is simply to postpone paying your taxes. Eventually you must withdraw it and pay taxes on it when you retire.
  • There’s a penalty when you take out the funds which makes this plan very restrictive unless if you are a first time home buyer. Then you can withdraw up to $35,000

Still want more info on how to save up for your down payment more quickly? Contact Arise Mortgage Corp. and we will guide you to the right direction.

 

 

 




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