Pay off mortgage from RRSP

Guest

I am going to purchase a new home and I plan to make $15,000 for down payment from RRSP. I am wondering whether I am allowed to withdraw more from RRSP and is it treated as this year income.

Thanks

sarah · Joined: 19 Mar 2006 Posts: 25 5.06 Dollars($)

Hi

If you withdraw more than $20,000, then it will be taxable. The $ 20,000 was only the limit for HBP Plan and used as one-time opportunity. You cannot use this plan to pay off your existing mortgage.

Thanks
SJ

Guest

I am not very much aware of RRSP. What is this RRSP basically??

Thanks
Patrin

sarah · Joined: 19 Mar 2006 Posts: 25 5.06 Dollars($)

Hi Patrin

The Registered Retirement Savings plan (RRSP) is a retirement plan established by you or your spouse or common law partner to contribute on it. An amount of earned income contributed to RRSP is usually exempt from tax from the period the funds remain in the plan. But you have to pay tax when you make withdrawal, or deposit any amount of cash, or receive any payment from the plan. You can create an account through any financial institutions like banks and credit unions.

At the age of 69, you have to choose any of the following option:

Withdraw the Money.
Transfer the money to a RRIF.
Use the money to purchase a life annuity.

If you withdraw the amount from RRSP, then you have to pay tax on the withdrawal amount. The RRSP issuer will not charged any tax on the amount transferred to RRIF or the amount used for purchase an annuity. But, you have to pay tax when you start earning from annuity.

Thanks
SJ

olivia · Joined: 19 Mar 2006 Posts: 13 3.76 Dollars($)

Patrin

RRIF (Registered Retirement Income Fund) is the most popular option in Canada. It provide a regular retirement income over the lifetime until the RRSP saving are paid out. It also allows the saving to retain their tax-deferred status until the funds are withdrawn.

Transfer to RRIF option means you are depositing the funds to "The Canada RIF". You can purchase compound interest Canada Saving Bonds during sales campaign from The Canada RIF. The minimum purchase amount is $500 per series whereas the maximum is $500,000 per series.

Hope this information will help you little more.

Olivia

Guest

I am thinking of to buy a house next year around June. And I was thinking of investing the money in RRSP fund. So that way I get a tax refund. And then next year in the month of June I just take out the money and put it towards the mortgage. Is am going in right direction.

sarah · Joined: 19 Mar 2006 Posts: 25 5.06 Dollars($)

Hi Rogger

You are thinking in right direction. Go ahead with your plan.

You are going to invest the money in May 2006 and claim your tax refund in February 2007. After then in the next month you can withdraw the money. And there is no problem while withdrawing, because it’s more than 90 days in the next financial year.

Thanks
SJ


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