How to Use Your RRSP to Purchase Your First Home!
In short,
the First Time Home Buyers’ P
lan (HBP) is a plan created to help you get into your first home! And, it all starts with your RRSP. Whether you’re buying a resale home on the market or building a new home with your builder–you can use your RRSP funds to pay for your investment without major tax penalties!
Here are the requirements:
1. You must be considered a First Time Home Buyer
2. You need a written contract to prove you’re purchasing a home
3. You must be a Canadian Resident at the time of your withdraw and new home purchase
4. You must live in the home for the first year (not purchase for investment purposes!)
So, here’s the scoop! If you’re a first time buyer and you wish to withdrawal funds for your down payment your bank will not withhold tax on withdrawn amounts of $35,000 or less as long as the withdrawn amount is paid back within 15 years.
Additionally, the withdrawn funds will not be included as income on your income tax and benefit return for the year you purchase your new home. Typically, the RRSP funds must be from your own account, and not from a locked or group RRSP plan.
Plan ahead–let’s talk timeline! When you plan on purchasing your new home you must have the funds in your RRSP account for at least 90 days before you withdraw.
Here are the RRSP rules:
1. You cannot withdraw more than $35,000 within the same calendar year of your HBP
2. The funds must be in your account for at least 90 days before you withdraw
3. You can use funds from more than one RRSP account if you are the owner of the RRSP
4. The home must be for you! You do not qualify if you are withdrawing funds for someone else
Do you qualify for this program? Check out the full breakdown
here!
Resources:
Agency, Canada Revenue. “Government of Canada.” Canada.ca, / Gouvernement Du Canada, 18 Jan. 2022, www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/what-home-buyers-plan/participate-home-buyers-plan.html#RRSP-withdrawalconditions.