I am single and retired and owe a balance of $4800 on my HBP with 4 years to go repaying at $1207 per year which I have to declare as income. I live on the Gov. CPP and OAS with supplements and with the current low interest rates I have actually been able to save some income. I have no other pension plan. I have also been able to obtain a Line of Credit at CIBC of which I have used $17,000 of the allowed $30,000. With this arrangement I pay about $230 income tax. If I double my HBP repayment deduction I would pay about $550 Income tax. This year I simply added the tax payment to my Line of Credit so I get the full $500 Ont. Seniors Tax Grant which I use for special purposes or to pay down my Line of Credit - my choice! Should I pay off my HBP next year - or even now - adding it to my LOC or deduct the total from my income next year and pay the resultant Income tax with my LOC? Now that I am slowing down and spending less money, plus the low interest rates, I am trying to think of a strategy to my benefit as I am in my 80's and would like to have things cleaned up before passing it all on to the kids!!
It would only make sense to repay the HBP faster if you knew your marginal tax rate would be increasing in the future. It sounds like that is not the case. By repaying it sooner with borrowed money, you are paying extra interest and potentially increasing your marginal tax rate. Probably not a good plan unless you know your taxable income will increase for other reasons in the next couple years.