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Down Payment vs. RRSPs

Lately, I’ve been pondering what to do with saving up for my condo down payment.

Currently, I plan to save $2,000/month towards my down payment. I’m investing half of that money towards the down payment in a non-registered mutual fund. The other half is going in a high interest savings account of 4%.

I want to increase my RRSP contribution to $300/month in May. But, am I better off increasing my RRSP by a lot in order to put myself in the next lowest tax bracket (and get a huge tax refund next year)? I would sacrifice saving money towards my down payment, but I figure I could borrow the money out of the RRSP for the First Time Home Buyer’s Plan, and have a big tax refund that I could put towards the down payment as well (or help fund my RRSP contribution for the following year). It would mean repaying back my RRSPs, as well as continuing my contributions, but I think I have 15 years to do that.

This is the plan the BF wants to do with his finances, but I’ve always heard horror stories about borrowing from your retirement. And when you do it, are you obligated to get a mortgage with the bank that holds your retirement account? That’s what my financial advisor hinted at the last time I went to meet with her, but at the time I was still in a lot of student loan debt, and didn’t feel like I was really in a position to ask more questions.

I think the smart thing to do is keep contributing $100/month for now, and then when it comes time to do my 2007 taxes, I’ll let my accountant figure out how much I would have to pay into my RRSP in order to get myself into that lower tax bracket. Because I run my own little side business, I do get the tax perks of being self-employed.

But, I want to get the most bang for my buck, and I’m not sure if this is the best way.

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