There are a few misconceptions surrounding RRSP’s as they relate to the home buying process that I’d like to put straight.

1) The first common misconception is:

“The RRSP MUST be used towards the Down Payment” = FALSE

You can use as much or as little as you like towards the down payment.

Now when I say as much, bare in mind that you can only withdraw up to a maximum of $25,000. If you’re married or buying with another first time buyer, they too can withdraw up to $25,000 for a total of $50,000

2) The second misconception out there is

“You’re ONLY eligible for this program as a FIRST TIME buyer.

False: Well, this is partly true.

For this program, the definition of First Time buyer is someone who has not owned a home that you occupied as your principal place of residence during the period beginning January 1 of the fourth year before the year of withdrawal and ending 31 days before your withdrawal. To make it simple, haven’t owned 5 years prior.

As you can see from above in BOLD, “occupied as your principal place of residence”, in essence, you could own 3 rental properties and STILL QUALIFY for this program.

3) I have to start paying back the RRSP withdrawal RIGHT AWAY = FALSE

Your first repayment starts the second year following the year you made your withdrawals. Generally, for each year of your repayment period, you have to repay 1/15 of the total amount you withdrew, until the full amount is repaid to your RRSPs.

As you can see, there’s much more to a mortgage than JUST rates.

Make sure you get The Right Advice at The Right Time

Mark Fidgett
604-273-2002
Vancouver Mortgage Broker
Owner www.NotaPennyDown.com

RRSP Home Buyers Plan

What is the HBP?

The RRSP Home Buyers Plan (“HBP”) is a federal government program that allows first time home buyers to currently withdraw up to $25,000.00 (the “Contribution”) from their RRSP to use in the purchase of their first home.

To qualify as a first time home buyer, the buyer may not have owned, or lived with a spouse or common law partner who owned, a principal residence beginning January 1st of the 4th year before withdrawal and ending 31 days before withdrawal.

How does it work?

A first time home buyer can withdraw up to $25,000.00 from his/her RRSP towards the purchase of a home. If the buyer is purchasing the home with a spouse who is also a first time home buyer, then they can both withdraw $25,000.00 each from their RRSP accounts.

Some conditions of the HBP:

• The buyer MUST be a first time home buyer and a resident of Canada at the time of withdrawal. The buyer MUST purchase or complete the build of the home before October 1st of the year following the withdrawal.

• Only RRSP contributions made 90 days before the withdrawal date may be used towards the Contribution.

• The buyer must intend to occupy the home as his/her principal place of residence no later than one year after buying or building it. Once he/she occupies the home, there is no minimum period of time in which he/she has to live there.

The buyer must repay the Contribution to his/her RRSP in annual installments equal to 1/15 of the Contribuiton amount, commencing the second tax year after the year of withdrawal and continuing thereafter for a period of fifteen years until the Contribution has been fully repaid to the buyer’s RRSP account. If the buyer does not repay the annual instalment in any given year, that amount due to be repaid will be added to the buyer’s income for the year and taxed as such.

Further information can be found on the CRA website here:

http://www.cra-arc.gc.ca/E/pub/tg/rc4135/rc4135-e.html