Becoming a homeowner is one of life's greatest milestones. And while it's exciting and thrilling, owning a home is certainly one of the most expensive ventures we make.
One of the common financial decisions homeowners continue to face is deciding whether or not to use their savings to pay down their mortgage or to invest it in their nest egg through a registered retirement savings plan contribution.
This dilemma is especially more problematic for first-time home buyers who have leveraged the Home Buyers Plan to help fund the purchase of their first home. Through the HBP, you can withdraw up to $25,000 from your RRSP to help fund the purchase of your first home. The funds are withdrawn tax-free as long as they are repaid within 15 years.
According to experts, many aspects – including a homeowner's age, remaining mortgage principal, income, expenses and tax bracket - all play a vital role in determining how to best allocate the funds.
A common strategy often recommended is to maximize your yearly RRSP contribution and leverage your tax refund to help pay down the mortgage.
