Sometimes, the hardest part about purchasing a home is coming up with the down payment. The Canadian Government wants you to own a home, but they understand that finding the funds for a down payment can be challenging. In order for you to be able to purchase your very first home, the government is allowing you to use your RRSP as a down payment.
The Home Buyers’ Plan is tailor-made to people who have some money in their Registered Retirement Savings Plan and want to buy a home. The plan lets you borrow up to $25,000 from your RRSP tax-free for a down payment on your future home.
Yes. If you and your spouse both have RRSP’s, you can each contribute $25,000 to your future home’s down payment.
Even though the money in your RRSP account is technically yours, you will have to pay it back within 15 years. Why? Because it is not being taxed. Since you are basically getting a chunk of your home’s full price tax-free – between $25,000-$50,000 – it is treated like a loan that you must repay.
Within two years of the day you withdrew the funds from your RRSP, you must begin the repayment process. Don’t worry, Canada Revenue Agency will send you a notice to remind you. This notice will let you know how much you can contribute to your RRSP towards the repayment and when it is due. Usually, it is due in the first two months of the following year.
In order to be eligible for the HBP you need to meet the below conditions:
Your home is your most valuable asset. It is probably the single largest investment you will make in your lifetime. Your home is more than a place to rest your head and raise a family. Your home contains equity. It is a treasured resource and in some cases, can even be used as an ATM (aka cash back mortgages and HELOCs – don’t worry we’ll get there).
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