Coming up with a down payment for a home can be a challenge. We all saw prices rise in our area to levels never seen before, pushing many aspiring homeowners to the wayside. The good news is, if you've been contributing to an RRSP, you may be able to take advantage of a plan to help first-time home buyers with the Home Buyers' Plan. Here is How You Can Use Your RRSP to Help Buy a Home.

What is an RRSP? 

An RRSP is a Registered Retirement Savings Plan. It's a savings plan that offers tax advantages to help you save for retirement. You and your spouse or common-law partner can contribute to RRSPs, and the amount you contribute can be deducted from your taxes. 

How much can I use from my RRSP for my Down Payment? 

With the federal government's Home Buyers' Plan, you can use up to $35,000 of your RRSP savings or $70,000 for a couple) to help finance your down payment on a home. You must have at least 90 days' worth of funds invested in a registered retirement savings plan to be eligible. You must also submit a signed agreement to purchase or build a qualifying home. 

Repaying Your RRSP What's great about the Home Buyers' Plan is that you won't have to pay tax on your withdrawals until 15 years later and only if they are not repaid back into the account. And you may actually qualify as a first-time home buyer, even if you've owned a property already. If you have not occupied a property that you or your current spouse or partner owned in the previous four years, you are regarded as a first-time buyer. 

Home Buyers' Plan Benefits The Home Buyers' Plan gives you the option of tapping into your RRSP savings to help with your down payment. This may be a great option for you as it will allow you to access some of your existing resources. 

The Home Buyers' Plan can help you make a 20% down payment so you can potentially avoid having to pay default insurance premiums. There are many benefits to this plan, even if you have the money for a down payment. 

Considerations 

It's critical to have both the advantages and disadvantages of this approach considered in your overall strategy. There are several things you should consider before using the plan. 

1. Since the money you put into your RRSP must be fully repaid over time, will you be able to make those contributions consistently?

2. How have your investments in your RRSP been doing? If you are doing well and you're getting good returns, it might not make sense to cash them in. The Home Buyers' Plan can lower your mortgage amount, but you'll need to determine if it's worth forgoing the tax-sheltered growth potential of your RRSP. 

If you are a first-time home buyer and are looking to start the search, and see what options you have available, get a hold of me today: 416-262-5127