What is the best way to save to buy a house – maximizing savings and without penalties?
The way you start saving for a home is really dependent on your actual time horizon. If you’re going to buy a home in the next year or two, you really want to keep your money in a very safe vehicle, perhaps something like a short term GIC, perhaps a savings account, or maybe even a money market mutual fund. That being said, if your time horizon is longer, perhaps you can save in a different vehicle.
If you start saving, for example, to an RRSP, there’s a program called the Federal Home Buyer’s Plan, that allows you to withdraw up to 25 thousand dollars towards the purchase of a first home. The definition of first home is that you or your spouse haven’t owned a home in the previous five calendar years.
So, saving money in an RRSP will allow you to not only get a tax deduction, for the amount you contribute.
It will allow you to access those funds sometime down the road when you want to buy that first home.
That being said, we also have a tax-free savings account, or the TFSA, which may be another alternative to be able to set aside money to help fund the downpayment on your home.
Best advice – speak to your financial adviser who will make sure you’re on the right track.