RRSP Home Buyers Plan - Diamond & Diamond Real Estate Lawyers

RRSP Home Buyers Plan

Why You Should Think About the RRSP Home Buyers Plan 

A Registered Retirement Savings Plan can be an important method of making your down payment on your mortgage.

The home buyers plan offered by the Canadian Government enables first time home purchasers to borrow as much as $25,000 from your RRSP tax rate to make your down payment.

In the event that you are eligible to purchase a home with another first-time home buyer, you can both tap into $25,000 from your RRSP for a total of $50,000.

Since the HBP is classified as a loan, however, you need to bear in mind that it must be repaid within 15 years. In order to be eligible, you must meet the following criteria:

  • Have entered into a written agreement to purchase or build a qualifying home.
  • You have not owned a home in the previous four years.
  • If purchasing with a spouse, you cannot have lived in the house they have owned in the previous four years.
  • RRSP funds must have been inside your account for a minimum of 90 days prior to withdrawal.
  • You cannot have any outstanding balance due associated with a previous home buyers plan.

What Happens if You’re Not Eligible for the Home Buyers Plan

If you take a withdrawal from the RRSP but are not eligible for the first-time home buyer’s requirements, this withdrawal is taxed and you will need to report it for tax purposes.

In order to participate in this process, you need to print off a copy of Form T1036. This is available on the Canadian Revenue Agency’s website.

Filling out section 1 is the initial process that allows you to provide this to your financial institution. Your financial institution can then hold your RRSP so they can fill out the second section.

You will then resend a T4RRSP form which will confirm how much money was taken from the RRSP as part of a home buyers plan. You will need to include this on your income tax return for the year in which you made the withdrawal.

Bear in mind that you have to take this withdrawal at least 30 days before taking the title of the home. If you try to do this outside of this window, your withdrawal is no longer eligible for the HBP.

You must repay the amount taken from your RRSP within a period of 15 years. The first payment is due two years after you first withdrew the money. You will get a notice of assessment directly from the Canada Revenue Agency and this will indicate the amount of a loan that has already been repaid and the amount that remains.

If you miss any payments, this could require you to include the amount that you did not pay as RRSP income on your taxes. You will need to put this on line 129 on your return. Contact us today for more help with real estate concerns. 

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