Are you looking for ways to top up your down payment so you can finally buy your first home? When you’ve exercised all of your options and still haven’t reached your goal, it’s time to consider using the First Time Home Owner RRSP Loan Program. This program allows Canadians to dig into their RRSP savings to use toward their first home. Learn more about this program and whether you qualify below.
The HBP is a program that allows you to withdraw up to $35,000 from your RRSP to buy or build a qualifying home for yourself or a relative with a disability. The withdrawal limit used to be $25,000, but on March 19, 2019, the federal government increased it for the first time in 10 years. When withdrawn, this money will exit your account tax-free, but you will be required to pay it back on a 15-year repayment plan.
To be eligible, you must be considered a first-time home buyer and a Canadian resident at the time of withdrawal. You must also qualify for a mortgage and possess a written agreement to buy or build a qualifying home. After you receive the funds, you must also occupy the home as your primary residence for one full year. Even if you or your spouse/common-law partner have previously owned a home, you may still qualify if you have not occupied a home within a four-year period. If you have previously participated, you may also be able to do so again, as long as your repayable HBP balance is zero and you meet all of the other eligibility criteria.
The majority of homes are eligible under the HBP. However, the rules surrounding co-ops may differ. It’s recommended to speak with a professional to determine if the type of home you wish to buy or build is eligible.
If you meet all of the criteria and have a written agreement available, you can start the application process. Just complete the Canada Revenue agency T1036 form online and bring it to your RRSP issuer who will finish the form and process the withdrawal. Upon approval, the funds will be released to you tax-free.
You will have 15 years to pay back the loan into your RRSP. The year you withdraw the funds, you will need to fill out a T4RSP form to report the amount; otherwise, you could face penalties. Then starting the second year, you will be required to pay at least one-fifteenth of the amount withdrawn back into your RRSP. This minimum amount must be paid back, but you can also submit more in one year if you wish to. Just remember to declare the amount on your tax form to avoid any penalties.
To learn more about the First Time Home Owner RRSP Loan program and to determine if you qualify, talk to one of our experts at Medallion Capital Group. We’ll be happy to consult you on the process and help you secure the home of your dreams.