You may be asking yourself, Can I use My RRSPs for a Down Payment?
Coming up with money for a down payment for a mortgage could be the only thing standing in the way for a potential homeowner. For some people it is the hardest part in obtaining a mortgage. It can be difficult to come up with the large sum of money for a down payment, but this shouldn’t be the only thing that stands in your way between yourself and homeownership. The Canadian Government understands this and they have come up with a program to help home buyers. The program is called the Home Buyers’ Plan. It allows first time home buyers to withdraw $25,000 from their Registered Retirement Savings Plan (RRSP) to put towards their down payment. This withdraw is taken out without penalties and is non-taxable. This seems like a great way to help you achieve your dreams of becoming a homeowner! Can I use My RRSPs for a Down Payment? We have listed some valuable information that comes associated with using your RRSP as a down payment
- The maximum you can withdraw is $25,000. However, if you are married, or you are purchasing with another first time home buyer the second person can also take out $25,000 which totals $50,000.
- To be able to qualify for this plan, the following conditions must be met:
- Only the person who owns the RRSP can withdraw the funds. You can make withdrawals from more than one RRSP as long as you own the RRSP. The combined withdrawal amount cannot exceed the $25,000 maximum per person.
- You can’t use funds from a locked RRSP.
- The funds must have been deposited into the account for at least 90 days before being withdrawn.
- A signed agreement proving your intent to purchase is required. This means you must provide a purchase contract from a builder or seller showing that you are the intended buyer.
- You must buy or build before October 1 of the following year after you withdraw from your RRSP. For example, if you withdrew funds from your RRSP in April 2010, you must buy or begin the build before October 1, 2011.
- The property that you are purchasing must be occupied by the owner unless you are purchasing the property for someone who is related to you and who is disabled, and the new home is proven to be better suited for them than their home.
- You can’t purchase rental or an investment property with the home buyers plan.
- You can take part in the home buyers plan if you are disabled to buy or build a home that suits your needs better.
- You must start to repay your RRSP two years after the funds are withdrawn from your RRSP. You have 15 years to repay the funds with at least 1/15 of the funds being repaid each year. If you fail to repay the minimum of 1/15 per year, that amount will be considered taxable income.
- You can take part in the Home Buyer’s Plan more than one time, but only if the balance from the first withdrawal is fully repaid by the time you want to re-apply.