How can you use your RRSP to help you buy your first home?
Today, about 50% of first-time home buyers use their RRSP savings to help finance a down payment. If you are a first-time home buyer, the Home Buyers Plan (HBP) allows you to withdraw money from your Registered Retirement Savings Plan (RRSP) tax-free to make your down payment. The HBP is administered by the Canada Revenue Agency (CRA).
There are certain conditions you must meet to be eligible for the HBP. For more information, contact CRA at www.cra.gc.ca.
How much can you withdraw?
- You can withdraw up to $25,000 from your RRSP
- If you buy the home together with your spouse, partner, or someone else, each of you can
withdraw up to $25,000, for a total of up to $50,000.
- The withdrawal from your RRSP does not need to be included in your income on your annual
income tax return, and no tax is taken off the money you withdraw.
What is the payback period?
- You don't have to start paying back the money to your RRSP until two years after the purchase of
- You must pay back all withdrawals from your RRSP within 15 years by making RRSP deposits each
year, starting the second year following your withdrawal. CRA will determine what your minimum yearly repayment will be and will notify you once you need to start repaying the amount.
- If you do not repay the amount due in a given year, it is included in your taxable income for that year and you'll have to pay income tax on this amount.
source: Financial Consumer Agency of Canada