With the federal government's Home Buyers' Plan, you can use up to $25,000 of your RRSP savings ($50,000 for a couple) to help finance your down payment on a home. To qualify, the RRSP funds you're using must be on deposit for at least 90 days. You must also provide a signed agreement to buy or build a qualifying home.
Here are six key questions about the HBP, and answers to help you understand the what, why and how of the plan.
1. So what is the Home Buyers Plan anyway?
The Home Buyers Plan is a program that lets you withdraw money from your RRSP and use it toward the purchase of a new house. Generally, you have 15 years to repay the withdrawal – each year, you pay one fifteenth of the amount and your repayment period starts the second year after the year you withdrew funds
2. How much can I take out of my RRSP?
You can take up to $25,000 from your RRSP as part of the Home Buyers Plan. As a couple, you can take up to $50,000. You don’t have to take all the money at once – but you do need to take the total amount you wish to withdraw within one calendar year.
3. Do I qualify?
You’re eligible for the Home Buyers Plan if you are a first-time home buyer, or you are buying or building a home for a related person with a disability. The qualifying person must also have a written agreement to buy or build a qualifying home, and the home must be the principle place of residence within one year after buying or building the home. Other details and restrictions may apply.
Take note: You’re considered a first-time home buyer if in the last four years you haven’t lived in a home that you or your current spouse or common-law partner has owned and up to 30 days before the withdrawal. Even if you have owned a home before, you will still be considered a first-time buyer if you meet this criteria.
4. What’s so great about it?
By using some funds from your RRSP, you might be able to accumulate the 20% down payment you need to avoid having to pay default insurance premiums. Plus, the more you put down, the lower your monthly mortgage payments will be. What’s more, the withdrawal is not taxable as long as you repay it within the 15-year period.
5. What else should I keep in mind before I go for it?
Before you jump into the HBP, you’ll want to be confident that you can repay the required amount each year. Plus, you want to weigh whether this is the right time to cash out your RRSP. If your investments are generating a strong rate of return, for example, it might be in your best interest to keep your money working hard for you within your RRSP.If you’re not sure this is the right move, it’s a good idea to talk to an advisor who can help you make the decision.
6. How do I keep track of it all?
The CRA will send you your Home Buyers’ Plan Statement of Account along with your notice of assessment every year. This statement shows your total withdrawals under the HBP, how much you’ve repaid, your outstanding balance and how much you can contribute to your RRSPs to repay the next tax year.