Saving for a home?
Here is how to use your RRSPs to help.
The Home Buyers’ Plan (HBP) is a program which was created so people can withdraw from their Registered Retirement Savings Plans (RRSPs) to buy or build a qualifying home for yourself, or for a related person with a disability.
Why should you utilize the HBP?
When you contribute to an RRSP, that income becomes non-taxable if you stick within your contribution allowances. This usually means you will get a refund when you file your taxes. This gives you an opportunity to save for your down payment and get cash back in your pocket.
There are a just few things to keep in mind if you plan to use the Home Buyers’ Plan.
First things first, you MUST be considered a “first-time home buyer.” You are considered a first-time home buyer if, in the four-year period, you did not occupy a home that you owned, or one that your current spouse or common-law partner owned.
You need to provide a written agreement to buy or build a qualifying home, either for yourself or for a related person with a disability. You also must be a resident of Canada when you withdraw funds from your RRSPs under the HBP and up to the time the home is bought or built.
Once purchased the qualifying home must be your principal residence, within one year after buying or building it. This also applies if you purchase or build a home for a related someone(s) with a disability.
Finally, you might be able to participate in the HBP again if your repayable HBP balance on January 1st of the year of the withdrawal is zero and you meet all the other HBP eligibility conditions.
How do you withdraw funds from your RRSPs for the HBP?
To use your RRSPs to put towards a home purchase you must complete the T1036 form and give it to your RRSP issuer. You can withdraw a single amount or make a series of withdrawals in the same calendar year and you have 15 years to repay the HBP before you will be taxed.
If this is something that sounds interesting to you, make sure to connect with your mortgage professional and they can help walk you through this process and advise on other great down payment savings tips.