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Your Guide to the RRSP Home Buyer's Plan
How can I own my own home?
Owning your own home is a cherished dream. And it's a dream that is now more affordable than ever before. Knowing what The Home Buyer's Plan is, and how John can help you use it, may be the most important step you will ever take so that you can stop renting and start owning. And owning your home is not just a dream, it is one of the best investments you can make in your future.
What is the Home Buyer's Plan?
The Home Buyer's Plan is a Government of Canada program that now makes home ownership easier for you. If you're a Canadian resident and you have not owned or shared a home of your own that was used as your principal place of residence within the last five years, you can participate. The Home Buyer's Plan lets you use up to 20,000 from your RRSP tax-free and interest-free to help buy or build a home. And your spouse or partner can also withdraw another $20,000 from his or her plan. That's a total of $40,000 available to you this year.
But we don't have any funds in a RRSP...
You can still take advantage of this program. Talk to John at 604-783-0778. If you have been earning income for the last few years, and you have not contributed, or haven't contributed your maximum allowed to your RRSP account, we can help. You have probably accumulated contribution room that is available to you under the carry-forward provision. Look at your tax assessment notice or call Revenue Canada to find out how much contribution room you have now. If you're like most Canadians you have significant room left, you can make new RRSP contributions. Depending on your credit eligibility, our financial institution can lend you the money needed to contribute the maximum allowable to your account. After 90 days you can withdraw those funds and repay the bank loan. You will have earned income tax deductions that will create significant income tax savings this year. This refund can be used to help purchase your home.
How can I get the down payment?
It can be hard to save for the down payment required to buy a home. Today's down payments can be as low as 5% of the purchase price, but that can still be enough to keep you in the renting rut. Michael Cowling's customers like you are using The RRSP Home Buyers Plan to get some of there down payment this way: Get a loan for the maximum you are allowed to contribute to your RRSP, as much as $20,000. This will generate a substantial income tax deduction this year. And that generates an income tax refund that you can use as part of your down payment! (A typical income earner with $30,000 in taxable income would pay more than $6,500 in income taxes. After purchasing your RRSP, you will only have to pay $1,000 that year, generating a refund of around $5,500. If there are two of you participating, then as much as $11,000 in income tax refunds can be used as part or the down payment on your dream home.)
How can I use the funds?
The funds you withdraw from your RRSP must be used to purchase a home by October 1 of the year following your withdraw. This can include your down payment or part of your down payment and any other expenses incurred, like moving, decorating or closing costs. When do I start paying the money back?
The Home Buyer's Plan requires you to repay your RRSP account. However the payments are spread over 15 years, and they begin roughly 3 years after you withdraw the funds. If you withdraw the maximum of $20,000 you will have to repay about $1,300 per year to your RRSP. It's like getting part of your mortgage from yourself, interest-free, tax-free!
Ok, what's the catch?
There isn't one. There are a few simple rules you must follow to qualify. And there are some forms to fill in. John can explain all of that to you. The Home Buyer's Plan is like a well-kept secret. Learn about it, and you can own your own home this year.
