As a first time home-buyer, it can sometime be difficult to save for a down payment. But, if you have been putting money away in a RRSP, you can use those savings towards the downpayment on a home under the Home Buyer’s Plan.  You borrow the money tax free and pay yourself back later!

Although your RRSP is always accessible, you are taxed on the money you withdraw unless you draw it under specific circumstances, and being a first time home buyer is one of them! You can withdraw up to $25,000 from your RRSP to put toward the down payment of a home, and if your spouse qualifies as a first time home buyer, hey can also withdraw $25,000. Meaning between the two of you, you may be able to put as much as $50,000 down on the purchase.

Here’s how it works:  You find a home you want to buy and you enter into an agreement to purchase the home before you make the RRSP withdrawal. The home must be your principal residence (no rental properties). To qualify under the program you have to have not owned a home for four calendar years. If you spouse owned a home during that time, but you did not you are still able to make a withdrawal as long as that home was not your primary residence. After you withdraw the money you must close on your home before October 1st of the year that follows the withdrawal year. So new homes fit the programs so do single family homes, semi detached, condos, and under construction.
You have 15 years to pay yourself back and repayment starts the 2nd year following the withdrawal. Each annual payment must be at least one fifteenth of the amount that you withdrew.

The Home Buyer’s plan is a great way to incorporate your RRSP investment strategy with a home purchase plans.  Especially since it is sometimes hard to save for a downpayment with so many other expenses. A more solid downpayment can lead to a better mortgage plan and lower monthly costs.

More more detailed information on the Home Buyer’s plan please check out the CRA website at www.cra-arc.gc.ca. The booklet # is RC4135
Also look for Form T1036, the required form for requesting a withdrawal.

Starting to think about buying your first home? Find yourself a mortgage planner and start asking some questions. Mortgage Planners deal with over 50 different lending institutions, and can help you decide on a mortgage the suits your individual needs. My advice is free and it’s a great place for a new homebuyer to start! I specialize in helping new homebuyer’s every step of the way by answering all their questions and being a source of information and support during the homebuying process.

Happy to help,

Jen Mikla, AMP
Mortgage Planner
Mortgage Architects
P: 403.863.9770
F: 403.398.1360
E: jen@mortgagewithjen.com
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