There are many factors to consider when purchasing a home, starting with the property itself, location, mortgage, etc… Before venturing into a purchase you need to get a commitment letter from a lender in order to know that you will be able to secure funding for the home you want to purchase. The government has introduced regulation that helps first time home buyers. The first helpful regulation is that as a first time home buyer you avoid paying the land-transfer tax. The second piece of regulation is the RRSP Home buyers plan. This regulation helps alleviate some of the stress involved in saving for a downpayment. So, what is the RRSP home buyers plan?
The RRSP Home buyers plan allows Canadaisns to borrow funds from their RRSP account for the purpose of using it towards a down payment when buying their first property. The details of the plan are as follows:
Buyers can withdraw a maximum of $35,000 to use towards a downpayment. If a couple is buying a property then they can each withdraw $35,000.
There is no penalty or tax disadvantages when withdrawing the funds.
The Funds have to be repaid back into the RRSP account within 10 years.
The Home buyers plan has allowed many Canadians to fast-track the process of buying their first home. If you don’t have these funds in an RRSP account, consider taking out an RRSP loan 6-9 months before purchasing your home. The year you take out the loan, your RRSP contribution will help you on your tax returns as well as every year you payback the loan, the interest on that loan is tax deductible. In conclusion, when considering a home purchase, you should not only speak with a realtor or a mortgage broker, but you should also speak with a financial planner.