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Purchasing a Home with Your TFSA

Would you like to find out how to fund your home purchase with a Tax Free Savings Account?

Did you know that young couples struggling to save money for their first home will find the tax free savings accounts (TFSAs) an immense help towards becoming owners.

The Financial PostsĀ Jonathan Chevreau has been a reliable go-to financial guru, wrote the following about building equity with the TFSA.

Consider that if both spouses each put aside the $5,000 annual maximum amount, they’d have $30,000 saved within three years–plus any growth–all free of tax.

It’s possible that a risk-tolerant couple willing to put stocks into their TFSAs while values are depressed could see that $30,000 rise to $40,000 or $50,000 in a few years time, if stocks roar back.

Of course, those who want the certainty of a down payment by a set time frame should settle for more conservative interest-bearing investments such as GICs, Canada Savings Bonds, money market funds or high-interest savings accounts.

Either way, the TFSA provides a good alternative to the previous route of borrowing from RRSPs. Under the Home Buyer’s Plan introduced in 1992, a first-time home buyer can borrow $20,000 ($40,000 for a couple) from an RRSP interest-free. The catch is this loan must be repaid within 15 years or suffer the tax hit. Such withdrawals, of course, will reduce your retirement nest egg, defeating the main purpose of RRSPs.

Find out more information by reading the rest of the article here.

This entry was posted on Saturday, May 2nd, 2009 at 4:44 pm and is filed under TFSA & RRSP. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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