Home Buyer's Plan

Most of us think about building retirement savings for the future. Too often, we forget that as first time homebuyers, we can get our retirement savings working for us a little earlier. Although sometimes things seem out of reach, on closer examination there is a solution around the corner.  Purchasing that first home may be a lot more feasible than we imagine. By using your RRSPs for a down payment for example, you may be able to buy a home sooner. Even if you've owned a home before you can still re-qualify if its been 5 years since you and your spouse owned a home and you've paid off your previous RRSP loan.

The Federal Government has established a program where first time homebuyers can take advantage of savings they have accumulated in their RRSPs for the purchase of their first home. The program allows each participant to withdraw up to $25,000 in RRSPs to finance the purchase under the First Time Homebuyers’ Program ($50,000 per couple). The great news is that you have 15 years to pay it back!!

For those purchasers who already have the down payment saved, purchasing an RRSP with those funds (if you have the room) may go financially further for you than the initial down payment. The transaction would also get you a tax deduction for the year in which the contribution was made. Potentially, at tax time, you would be eligible for a tax refund due to the RRSP contribution. The tax refund would represent additional funds that could be used for other incidentals and closing costs. One factor that is very important to remember here is that the RRSP funds must be on deposit for 90 days to be eligible.

The payback period is monitored and regulated by the Federal Government. They will remind you annually the amount that is required to be deposited in to your RRSP. As long as the program is adhered to, you have 15 years to repay with no penalty. It is borrowing from your golden years but not depleting your retirement savings.

For more information on the First Time Homebuyers’ Program please visit http://www.cra-arc.gc.ca/tax/individuals/topics/gst-hst-rebate/menu-e.html or contact your Financial planner.