Dipping into RSP to pay the mortgage.

There was a discussion here the other day about someone dipping into their RSP to pay the mortgage on the investment property they couldn’t sell.

It brought up comment anecdotes about others dipping into their retirement funds to pay the mortgage.

DON’T DO IT!

RSPs are protected in bankruptcy, but if you withdraw from them to pay for a losing asset and end up going bankrupt you lose not just the home, but your retirement savings as well.

And you want to retire don’t you?

You should exhaust all other options before touching your RSPs and that includes the option of bankruptcy.  Losing your home isn’t nearly as bad as losing your home and all of your retirement savings.

Real estate is not always the direct path to riches, leverage is a beautiful thing on the way up, but it can really bite on the way down.   Just ask anyone in who bought in the hot bubble markets of the US in 2005.

Don’t make the mistake of throwing away your retirement savings, especially if you don’t have a lot of time to start over with your savings.

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Someguy
Guest
Someguy
@RaggedyRenter: It comes out of CMHCs equity first. Equity paid for not by the taxpayer but by those that acquired the mortgage insurance. It only becomes a taxpayer issue if sufficient bankruptcies and losses to their equity force the CMHC itself into insolvency. To calculate the probability look to what percentage of properties you believe will require the mortgage insurance to pay the loan issuer, and how much the payout will need to be. Say prices correct nationally by 30% and that 600bln represents 670 billion in actual properties at today’s prices. I believe these examples are erroring far on the side of caution. That makes a 200 billion dollar shortfall if ALL of those properties owners become insolvent. I think that would be a grave error. I think you will be unlikely to see even 5% go into bankruptcy,… Read more »
MarKoz
Member

@Makaya:
There is a blog called mpisucks.com that complains of the specific problems of no fault in Manitoba. I can’t vouch for its accuracy because I haven’t read the act that is the foundation of your auto insurance. Still, it’s a place to start.

MarKoz
Member

@Makaya:
Hi Makaya:
I don’t know the specifics of Manitoba no fault. Generally, no-fault systems work by providing the same coverage to anyone injured in a motor vehicle accident whether they are at fault for the accident or an innocent victim. Loss of income is compensated as a percentage of what you actually earn up to a certain maximum – higher income earners lose out. Medical expenses are covered – up to a point.

The system takes away the right to sue. A claim for pain and suffering is not part of any no fault system I am aware of. To my knowledge there is no way you can “buy in” to get coverage for pain and suffering. Consulting a Manitoba lawyer would be the best way to get that question answered.

patriotz
Member

@logic:
The RRSP home buyers plan requires you to pay back the money you’ve taken out on a fixed schedule. If you don’t it becomes taxable income.

Bottom line is that if prices are really cheap it’s a good idea. If they’re not it’s not.

Also a TFSA is a much much better vehicle for saving for a down payment. Withdrawls are never taxable and never have to be paid back. Don’t even think about using money from an RRSP unless you’ve already maxed out your TFSA.

More Data Please
Guest
More Data Please

@jesse: re: China commodity growth model.

Jesse, thanks again for stirring the pot. Here are some demand side thoughts.

http://www.washingtonpost.com/world/chinese-glued-to-us-debate-with-envy-and-concern/2012/10/23/746362a6-1ce7-11e2-8817-41b9a7aaabc7_story.html

Forget “envy and concern”. What this says is that the people of China have a point of view while other parts of the world could care less about what we do over here in North America Land.

The trillion dollar question is will the China bite, consume more as “self adopted North Americans”, and validate a Chinese domestic growth model in the current sense?

We know they like to bid up real estate and buy cars over there but do they like the outcomes? Do they get enough American TV? What is the real deal? Do they like what’s happening or are they merely more concerned that things are more uncertain now?

All comments are welcome.

More Data Please
Guest
More Data Please
@Makaya: re: Lower premiums from out of province autoplan insurer. Please post your experience on making a claim. Also, if the out of province insurance beneficiary is being screwed over by local repair shop, please make some noise on monopoly abuse by ICBC. Those signs mentioning ICBC by name at the repair shop come to mind. I like your post and thoughts about your wager. Are we overpaying the bureaucrats at ICBC? Possibly… The question is, does paying premiums to an out of province firm work in practice for the beneficiary, and if not why not? The post on deductables relative to average automobile value is also interesting. ICBC’s minimum possible $300 comprehensive is the interesting one. Consider the broken side window on every car in a row of cars. An urban addict who is out of money for his… Read more »
logic
Guest
logic

Hey, since we’re talking RRSP, a question for you lot.

AFAIK, one can use 20k (per person) of yr RRSP as part of a house deposit (this works as a loan against yr RRSP that has to be paid back over time, no?).

My question is this: when the time to buy is right (you know, in a few years time, maybe), is this an efficient way of using that financial flexibility to boost a deposit? (would add 40k to our 100ish k current deposit). Or are there drawbacks that I am not aware of?

jesse
Member
To change the subject completely to a potential slowdown in China and the effects on hard commodity prices, read Michael Pettis’s article, aptly titled By 2015 hard commodity prices will have collapsed This is going to come as a shock to many people.  In my discussions with senior officials in the commodity sectors in Brazil, Australia, Peru, Chile and even Indonesia, it seems to me that many analysts have been insufficiently skeptical about the Chinese growth model and are unaware of how dramatically the consensus has changed in the past two years. They have failed to understand how deep China’s structural problems are and how worried Beijing has become (this worry may be best exemplified by the extraordinary growth in flight capital from China since early 2010). Under these conditions I don’t see how we can avoid a very nasty… Read more »
Aleksey
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Aleksey

@southseacompany:

They will correct their outlook next year for additional 6-10% and few years to follow. Morons. It’s been less than a month when they were saying that it’s not gonna happen. http://www.theprovince.com/business/House+sales+buyer+market+Greater+Vancouver/7333971/story.html

Now they are talking about decline which will take underwater anybody who bought this month with 5% downpayment. Economists my ass.

jesse
Member

Bottom Call!!!1!!

“If over the next year prices fell by 10 per cent I wouldn’t be shocked, but I think [prices] would rebound,” [Tsur] Somerville said. “China slowing down dramatically and causing dropping commodity prices would be dramatic for B.C. But I don’t see anything out there right now, to push us into major price declines.”

http://vancouverpeak.com/groups/general-chatter/forum/topic/bottom-call-thread/?#post-2639

He doesn’t “see anything out there right now” to bangkok prices, except for China slowing down.

Anonymous
Guest
Anonymous

@mac: Oops, make that .5% per month

Anonymous
Guest
Anonymous

@southseacompany: Not 7.35% or 4.56% but 6% down on the nose! Yo Tsur, its already down by more than that, and I believe the collective, non-vested view is that it will go down a lot more than .05% per month next year.

jesse
Member

@southseacompany: Down 6 per cent? I thought I already staked that one! It’s almost as if… nah!

mac
Member
mac

@southseacompany: OK. Now even I’ll admit Tsur is being a twat. What happened to no trigger for prices to go down?

southseacompany
Member
southseacompany

Tsur Somerville, Cameron Muir, now bears;

“Vancouver home prices could drop by 10 per cent next year, says UBC expert”

http://www.theprovince.com/business/Vancouver+home+prices+could+drop+cent+next+year+says+expert/7435812/story.html#ixzz2ABNBdZT9

“As home sales continue to plummet in Vancouver, it wouldn’t be surprising to see 10-per-cent price declines next year. That’s the view of University of B.C. real-estate economist Tsur Somerville, who was asked to respond to new market forecasts released by the B.C. Real Estate Association”

“The plunge in sales will cause a six-per-cent price decline in Vancouver’s average home price, Muir said…”

Patiently Waiting
Member
Patiently Waiting

@Name taken: I don’t know about today, but back in the 80s learning to drive stoned was a teenage rite of passage in Vancouver. Kids used to hotbox in a secluded spot – close all the window and pass around multiple joints until the air was saturated with smoke – then drive around all night. But, of course, nobody was drinking and driving after all those horrific MADD displays in front of the school. 😛

Makaya
Member
Makaya

@MarKoz: Thanks a lot MarKoz, this makes a lot more sense to me now, I had no idea of this subtlety. Since you seem to be very knowledgable, do you know if it is possible to insure yourself for “pain and suffering” elsewhere? (Sorry guys for having taken over the thread today with the car insurance discussion).

Simple
Guest
Simple

Just attended Garth’s talk in Toronto.

You will be happy to know that he acknowledged Ben’s data this time.

Other than that, not much new. Vancouver will be 40% lower over the course of a few years…..

MarKoz
Member
@Makaya: @Makaya: Hi Makaya: Manitoba has a “no fault” insurance scheme. If you are injured you take what they give you. You cannot sue for “pain and suffering” and your compensation for a lost finger is the same for a construction labourer as for a concert pianist. It is what happens when you let an insurance company make its own rules. The fox is watching the hen house. The insurance company gets to collect premiums but has (comparatively) little to pay out. I am a personal injury lawyer and sue ICBC all the time. My clients don’t always get what they deserve, but they get far more than any injured motorists in Manitoba. In Canada there are laws limiting the amount of compensation an injured person can receive for pain and suffering (currently approximately $340,000 for the worst injury imaginable)… Read more »
Name taken
Guest
Name taken

@Vote Down The Facts:

You forgot to mention people who pull up at the rest stop, take a leak, smoke pot then hope back in their car and continue driving to the next rest stop. Seen that many times.

WOWSERS
Guest
WOWSERS

Re Don Fosgren MC2 president…… I bet he bought 2 at cost, at least 40% off no shit Sherlock he might actually have positive yield. I would buy 2 myself at developer cost, maybe 3 . Bottom line developers scared shirtless these days

paulb
Member

New Listings 186
Price Changes 159
Sold Listings 136
TI:18925

http://www.paulboenisch.com

ReadyToPop
Guest
ReadyToPop

The crackdown by the Financial Services Authority is designed to prevent a repeat of the reckless lending which led to the financial crash.

New crackdown will make tough lending rules ‘a permanent feature’ for millions

Oh Harold….the bank just turned us down….pity!

Anonymous
Guest
Anonymous

Having been out of the country for some time I am surprised by the large number of For Sale signs I am seeing. Also surprised by the for lease signs of store fronts on West 10th. I don’t think this is as simple as internet shopping…

jesse
Member

BIV: Don Forsgren: Home makerIntracorp president Don Forsgren sees growing value in developing projects around transit hubs in Metro Vancouver

Don Forsgren has heard pundits speculate that Vancouver home prices will drop by as much as 40% during the next five years – but he’s not having any of it.

The Intracorp Canada president recently committed to buying two units in his company’s MC2 development near southwest Marine Drive and Cambie Street. Another 18 units in that project have sold to insiders while the remaining 425 condominiums will be made available October 27 to the 6,500 people who have registered to be eligible buyers.

The purchases are the fifth and sixth properties that Forsgren owns and plans to rent.

Hear that -40%ers? Don’s NOT HAVING ANY OF IT. Even if he has to buy them all himself.