The Home Buyers' Plan (HBP) is a Federal program that allows first time home buyers the ability to withdraw up to $35,000 from their Registered Retirement Savings Plan (RRSP). This means that a couple that is buying their first home is able to pull up to $70,000 total from RRSP's for the Down Payment. The funds must be in the RRSP account for at least 90 days prior to the withdrawal. To withdraw funds under the HBP, there is simply a form to fill out and provide to your financial institution. You must repay the withdrawn funds within a 15-year period. The payment begins in the second year of the 15 years and is calculated as the withdrawn amount divided by 15. It can be paid back faster.

$35,000 / 15 years = $2,333.33 per year

Am I Eligible To Use The HBP?

You must be a resident of Canada with a written agreement to buy or build a qualifying home. All applicants involved must be first time home buyers, which means that you have not owned a home in the last 4 years. Also, you must intend on occupying the home as your principal residence within one year after buying it.

Why Should You Use The HBP and RRSP?

Utilizing a RRSP account is a great practice in general as you can deduct your yearly contributions from your net income and defer tax payments on those funds. The main point of this savings vehicle is to defer tax payments until you are retired and making less annual income, therefore subject to a lower tax bracket when you withdraw your savings (avoid tax payments now while in high tax bracket, pay later in low tax bracket). Your RRSP can be invested and grow over time based on those investments made. So, the most beneficial route of action for first time buyers that are starting to plan to purchase a house is to set up an RRSP account. If you already have one, check your contribution room on My CRA. The annual RRSP deduction limit is either 18% of your earned income the previous year or $27,830, whichever is lesser. Make a plan to get your down payment savings into your RRSP so you can deduct these contributions come tax time and save!

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Sam Ahier - Equity Care Mortgages 519-212-4480 Email: samahiermortgages@gmail.com