Investing in RRSP vs. mortgage by https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5 By Abigayle Hamilton & Kassandra Garofalo en-us 2022-03-13 21:26:57 UTC 2022-04-03 22:47:19 UTC hello@padlet.com https://padlet.net/icons/png/1f4b0.png Welcome abigaylehamilton https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2092687506 Welcome to our Padlet wall! Here you'll find information about investing in an RRSP or in a mortgage. We will share our research findings on the pros and cons of each, and everything you need to know before choosing either option. ]]> 2022-03-13 22:04:04 UTC https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2092687506 Introduction abigaylehamilton https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2124645747 Welcome to our board! Here you will find information about the pros and cons of paying off a mortgage vs. investing in an RRSP. This can be a guide to decide which option may be better for you. We do not claim to be professionals and this is strictly the our opinion which we came to after researching with credible sources. We hope you enjoy and find it useful!]]> 2022-04-01 01:59:55 UTC https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2124645747 What is a mortgage? abigaylehamilton https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2124662211 A mortgage is a loan used to purchase a home, land, or other types of real estate. The borrower agrees to pay the lender back over a determined period of time with interest. To secure the loan, the property being purchased with the loan is used as collateral.]]> 2022-04-01 02:12:35 UTC https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2124662211 What is an RRSP? kassandragarofalo https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2125554161 An RRSP is a retirement savings plan that you establish, that we register, and to which you or your spouse or common-law partner contribute. Deductible RRSP contributions can be used to reduce your tax.
Any income you earn in the RRSP is usually exempt from tax as long as the funds remain in the plan; you generally have to pay tax when you receive payments from the plan.
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/registered-retirement-savings-plan-rrsp.html

]]> 2022-04-01 14:39:17 UTC https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2125554161 Video #2: The 4 C's of Lending Mortgages in Canada kassandragarofalo https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2125574567 This video talks about the four C's banks consider before lending a mortgage to a client. Credit (score), Capacity (how much debt you may have), Capability (ability to pay loan back, your income), Cash (down payment, equity, etc).

We chose this video as we believe it is important information people should look at before considering a mortgage loan. People should focus on lowering their debt, raising their credit score, and proving that they are trustworthy borrowers. ]]> 2022-04-01 14:51:38 UTC https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2125574567 Video #3: RRSP Tips and Mistakes to Avoid kassandragarofalo https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2125585020 Tip #1: Deadline for contributing is March 2
Tip #2: Contribution limit is 18% of your previous earned income. The limits caps out around 25-26k.
Tip # 3: Registered pensions affect RRSP room as the RRP and RRSP is combined.
Tip #4: You don't have to cut taxes immediately.
Tip #5: Withholding tax on withdrawals, try to avoid withdrawals.
*Reminder* You do not get the contribution space back

Mistake #1: Not investing within the RRSP (holding cash)
Mistake #2: Withdrawing money too early
Exceptions are Home Buyers Plan and Life-Long Learning Plan.
Mistake #3: Over-contributing to your RRSP. If you do, you pay a penalty of 1% on the excess amount. Everyone does get a 2k cushion though.  
Mistake #4: Blowing your tax refund! 
Bonus Tip: Reinvest your tax refund!

This video was chosen as it has crucial information on how to have a successful RRSP. It provides tips as well as mistakes to avoid. We liked how the video's host included personal experiences and shared why his decisions may not have been the wisest at the time. As a viewer, you are able to learn from his mistakes and avoid making them yourself.

]]> 2022-04-01 14:58:11 UTC https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2125585020 Video #1: Canadian Mortgage Basics kassandragarofalo https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2125611027 Going over mortgage basics,  this video explains components of a mortgage while giving tips on what they recommend when choosing between the options. When buyers are making a down payment of less than 20% then they are required to have mortgage insurance. This insurance only protects the lender but could mean lower interest rates for you as it is less risk for the bank. Variable rates are recommended because they will save you money in the long run. When choosing between un-accelerated payments and accelerated payments, choose accelerated and weekly payments are recommended as it makes managing your money a little easier. Always get pre-approved and makes sure it is full underwritten pre-approval. Lastly, work with a mortgage broker and not a bank as the broker has more knowledge of mortgages and the market. 

We chose this video as it provided easy-to-digest information for anyone who may be contemplating getting a mortgage. The host in this video did a great job providing insight on what you should consider and what the better options are in most situations. All tips discussed are extremely useful.]]> 2022-04-01 15:13:39 UTC https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2125611027 Bonus Video #5: RRSP Tax Benefits kassandragarofalo https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2125613923 2022-04-01 15:15:24 UTC https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2125613923 Image #1 kassandragarofalo https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2125627600 This image represents "the weight of your potential home's value". Is it worth the price? Can you afford it? Symbolically this picture is perfect in representing all of the research and work you must complete prior to deciding whether or not you can or want to purchase a home. ]]> 2022-04-01 15:23:45 UTC https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2125627600 Image #2 kassandragarofalo https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2125631501 Time is ticking, and retirement comes faster than we realize. Have we been preparing enough, long enough? Registered Retirement Saving's Plans (RRSP) are considered when planning for your retirement, but are they the best option?]]> 2022-04-01 15:26:22 UTC https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2125631501 Article #1: Invest in an RRSP or pay off your mortgage? abigaylehamilton https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2126067697 This article was taken from Desjardin.com. It is stored under their action plan and tips for savings and investments. The article shares Desjardins opinion about options to manage your money and money decisions in ways that will benefit you most. They believe that it is always best to find a balance between paying your mortgage and contributing to your RRSP because just paying your mortgage would require much discipline to catch up on RRSP contributions and buying a house is eventually essential and you don't want to wait too long to purchase. 

We found this article helpful as it explained the perspective well. A balance of both gives you the best of both worlds, you don't have to miss out on either. It gives great advice and is very realistic.]]> 2022-04-01 22:12:48 UTC https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2126067697 Article #2: Another opinion- invest in RRSP or pay down mortgage? abigaylehamilton https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2127349445 The article outlines two options; 
  1. Pay $1,187 per month in mortgage payments to pay off a $100,000 mortgage in 10 years, then continue to pay $1,187 per month into your RRSP for 15 years, and also invest the tax savings in your RRSP, or;
  2. Pay only the required $739 per month on your mortgage, and pay it off over 25 years, and invest the difference of $448 ($1,187 less $739) plus tax savings in an RRSP.
It then outlines the calculated outcomes of each option coming to the conclusion that "You are better to pay off your mortgage first if your mortgage interest rate is equal to or higher than the rate of return on your RRSP.  However, if the rate of return on your RRSP is consistently higher than the mortgage interest rate (can you guarantee this?), you would have more money by paying the lower amount on your mortgage, and investing the difference in an RRSP. "

I really appreciated this article because I found it very comprehensible. In plain terms it shared how you can decide which option is best for you. Gather all your needed information and decide if you should contribute more towards your mortgage for a shorter time or to your RRSP for longer.
]]> 2022-04-03 17:18:24 UTC https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2127349445 Article #3: The Home Buyer's Plan abigaylehamilton https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2127358943 This is from the Government of Canada website. It outlines and explains what the Home Buyers Plan is and how you can qualify for it. 

I personally think that this is a great option for young people to know about. While you're living at home with your parents you do not have mortgage payments and you probably don't own a home yet. This means that you can be contributing a lot more to your RRSP. After a few years, you can then use the Home Buyers Plan to purchase your first home. Personally, this possibility gives me hope that as long as I continue, I'll eventually have enough to buy a home and that sounds worth it to me.]]> 2022-04-03 17:30:59 UTC https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2127358943 Article #4: What is the most tax efficient option for young homeowners? abigaylehamilton https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2127416762 This article expresses the priorities of paying off your mortgage and saving for retirement. They ask "if they can't afford to do both, how should young adults choose between ramping up their monthly mortgage payments and making valuable contributions to a registered retirement savings plan?" It gives a well-described example of why it can be more tax-efficient to delay RRSP payments and pay off your mortgage sooner. 

It does only come out to be about a 2% tax break so it comes down to whichever option works best for you. TFSAs are a whole other topic on its own but I want to mention that saving in a TFSA may be a better choice. Investing in an RRSP means that the money cannot be taken out anytime before retirement whereas in a TFSA, the money can be taken out if you need it. It's important to read and research as much as possible about investing in an RRSP and paying down your mortgage. The more information you have, the better you can determine which option is best for you.]]> 2022-04-03 18:49:15 UTC https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2127416762 Reflection abigaylehamilton https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2127506611 1. What did you learn about your topic that surprised you the most?
What surprised me the most about this topic was how simple it can be to make the decision once you understand what factors are at play. Once you know what the interests rates are for both the mortgage and RRSP, the answer becomes clear.
2. Provide a real-life example of how this topic is relevant or interesting for you.
This topic couldn't have come at a better time for me. I'm lucky to be still living at home so I have the opportunity to contribute a bigger portion of my income to my savings. From the examples I found during my research, I've come to realize that I will soon be in the same position with my OSAP repayments. Once I get closer to graduating, I'll have to determine if I could make and save more money if I pay off my OSAP as soon as possible or if I should make a bigger contribution to my RRSP and TFSA. I'll decide based on the interests rates. If the OSAP repayment interest is low, I will contribute a large percentage of my income to my TFSA and RRSP.
3. If you could pass on your knowledge to a family member or friend, what do you think is the most important thing to pass on?
I believe the most important thing is that they should always do the research before investing their money into anything. There are tons of resources to help you avoid paying more than you need to. Read everything before signing, read the fine print, and ask questions. If they find it overwhelming, seek a professional's assistance because it is not worth the risk nor is it wise to go into investing blindly. ]]> 2022-04-03 20:52:41 UTC https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2127506611 Video #4: Can I Use My RRSP To Invest In a Real Estate kassandragarofalo https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2127559258 Yes, you certainly can however, technically you cannot use your own RRSP. There are ways around this, and this video will explain how. One way is lending it to someone. Secondly, you could transfer your funds to a trustee company so no tax events can occur. Trustee companies cannot give advice they are only to hold your funds and do as you say with them.

We found this video interesting as it discusses how you can invest in RRSP and then use it on a mortgage. This video is quick and straight to the point. With this knowledge, it could help you apply your RRSP to invest in a property without breaking any rules and avoid paying more taxes than you need to, saving you more money in the long run. ]]> 2022-04-03 22:19:11 UTC https://padlet.com/abigaylehamilton/7ci5p5h3w892uef5/wish/2127559258