Borrowing From Your RRSP’s

With the federal government’s Home Buyers’ Plan, First Time Home Buyers can borrow up to $35,000 of their RRSP savings to help finance their downpayment on a home. This amount doubles to $70,000 if you’re buying with your partner or spouse, so long as they also qualify as a first-time home buyer.

“One of the best parts of borrowing from your RRSP is that the withdrawal is not taxable as long as you repay it within a 15 year period. So essentially, it is a tax-free, interest-free loan from yourself.”

Who is Eligible? To take advantage of the Home Buyers’ Plan you have to be a first time home buyer. To qualify as such, you need to be a Canadian citizen and you must not have owned any property within four calendar years of the purchase (this means you haven’t lived in a home owned by you or your spouse within the previous four years).

Also to be eligible, you must have a written agreement to buy or build a qualifying home and you must plan to live in the home. The Home Buyers’ Plan is not available for the purchase of  an investment property. The funds in the RRSP must also be there for at least 90 days prior to the withdrawal.

Repayment Rules Repayment of your RRSP loan must be completed within 15 years of withdrawal. Those taking advantage of the Home Buyers’ Plan will receive a statement from the government which outlines their repayment requirements. Another benefit of the Plan is that it allows you 1 year to adjust to the expenses of becoming a homeowner and to prepare for when repayments begin. You will then be required to repay a minimum of $2,333.33 per year back into your RRSP for the repayment period, if you borrowed the full $35,000. Borrowers are required to repay the minimum amount each year or declare it as taxable income.

Taking advantage of the Home Buyers’ Plan is a great option as you are drawing from your existing resources to create your downpayment. If you are looking to buy your first home contact me to discuss if using your RRSP’s is a suitable option for your individual situation.