Increasing Your Down Payment by Using Your RRSP
If you are planning on purchasing your first home, you can withdrawal up to $35,000 from your RRSP as money for a down payment on your home. This program is called the Home Buyer’s Plan (HBP) and it’s made possible by the federal government. The program is straight forward, but there are a few things to note.
Qualifying for the program:
To qualify you must not have owned a home in the last four years OR have lived on a house that your spouse owned in the previous 4 years. An exception to this rule, is for someone who has a disability or is helping someone with a disability. In this case, one can withdraw from an RRSP to purchase a home at any time.
Paying back the RRSP:
You have up to 15 years to pay back the borrowed amount from the RRSP. Your first payment starts the second year after withdrawal; i.e., if you withdrew funds in 2023, your first year of repayment will be 2025.
Each year, Canada Revenue Agency (CRA) will send you an HBP Statement of Account to advise how much you owe the RRSP that year. Your repayment does not count as a contribution, as you’ve already received the tax break from those funds. If you happen to pay more than required in one year, your balance in the years to follow will be reduced.
Requirements to withdrawal:
To withdraw from your RRSP, the funds must have been there for at LEAST 90 days. You can still withdraw the money from your RRSP and use it for your down-payment, but it won’t be tax-deductible and won’t be part of the HBP. In March 2019, the government increased the amount each person can withdraw to $35,000, which is $70,000 for a couple.
If you have further questions around the Home Buyer’s Plan or questions around down payments in general, feel free to connect.