Your Registered Retirement Savings Plan, or RRSP, is often seen as a long-term investment. For first-time home buyers, it can actually be used to help fund your down payment. Here’s what you need to know:
The Home Buyers’ Plan is a program set up by the Government of Canada that gives first time home buyers the opportunity to withdraw money from their RRSP to use towards a down payment for a new home, completely tax-free. Each person is eligible for up to $25,000. If you are purchasing a home with another person, both may withdraw $25,000 for a total amount of $50,000.
You must be a first-time home buyer. A first-time homebuyer is anyone who hasn’t owned and occupied a primary residence for a minimum of four years before the date of withdrawal.
You must be a Canadian resident at the time of withdrawal.
Your home must be purchased or built within one year of the withdrawal.
Repayment must be made within 15 years. Each year, 6.67% of the money must be paid back. Skipping a payment will cause the payment amount to be counted as income, and you will be required to pay taxes on it.
While this can seem like a perfect solution for many first time homebuyers, it is important to recognize how dipping into your RRSP now may affect your future. Ask yourself and your mortgage experts a few questions. Will you be able to handle the repayment amount each year? Will cashing out and forgoing future growth potential of your RRSP be worth reducing your mortgage amount? These are questions that will play a large part in whether or not this product is right for you.
If you are a first time homebuyer and need expert advice on your unique situation, contact the experts at Source Mortgage today. We can help you discover where your money will count the most and find solutions that will make your home-owning dreams come true!
Source was absolutely great to work with - went above and beyond to help us get everything done when buying our new home. Highly recommended!! Chad and Jenelle Richards Jan 09 2013
Chad and Jenelle Richards
Added January 23rd 2013
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