USING YOUR RRSP FOR A DOWN PAYMENT

The Home Buyers’ Plan allows singles or couples to withdraw up to $25,000 each, without penalty, from an RRSP when used towards the purchase of a first home. The program has advantages and disadvantages, but it rates as one of the best ways to get that first home sooner.

• Few things in life are free and the withdrawn amount must be repaid back in incremental amounts of 1/15 per year over a 15 year period. The repayments start a couple of years after the purchase date of the home.
• While the money is outside the RRSP it is not earning interest. However, it is the consideration that the value of the home is most likely increasing and the higher your down payment, the lower will be your mortgage payment.

• Under Canada Revenue Agency regulations, RRSP funds are subject to tax if withdrawn within 89 days of contribution, so it is necessary to plan the transfer and withdrawal carefully.
• There are stipulations on withdrawing RRSP funds, depending on whether the funds are applied to a resale property (house or apartment) or a new construction.
• Buyers of existing homes must make their RRSP withdrawals in the same calendar year or within 30 days after the closing date.
• Generally, new-home buyers must buy or build their home before October 1 of the year following the year of the first withdrawal.
• Someone who has not owned a home at any time during the previous four years and does not have an existing HBP under repayment is considered a first-time buyer for the purpose of the RRSP program.

While there are exceptions to these rules, it is essential that buyers follow the guidelines to avoid penalties and obtain the full benefit of this program. Download the PDF for additional information and forms or Contact us and we will be more than happy to answer any questions you may have on this program.