- Image: Francesco Marino / FreeDigitalPhotos.net
If you’re a first-time home buyer, this program will allow you to withdraw up to $25,000 from your RRSP, tax-free, in order to buy or build your own home.
To be eligible, you must be a first-time buyer, either buying or building a house for yourself, and be the annuitant of the RRSP to be used (i.e. the person who is entitled to receive payments from the RRSP). You may also use your RRSP funds to buy or build a home for a relation with a disability. If you have more than one RRSP, you may withdraw funds from some or all of them. Through the Home Buyers’ Plan, you are not charged any tax on your RRSP withdrawal, and you have a set amount of time to replace the funds in your account – a bit like an interest-free loan. The only restriction is on locked-in RRSPs: if you have one of these, you may not be able to access the funds for the program.
In addition to being a first-time home buyer (or builder) and having an RRSP in your name, you will also need to meet all of the following conditions to be eligible for the Home Buyers’ Plan:
- You must be a resident of Canada
- You need a written agreement or offer of purchase with a builder, contractor, realtor or private seller outlining your agreement to buy or build a house. Pre-approved mortgages are not sufficient in this regard, and must be accompanied by a written agreement.
- The house will be your principal place or residence (or the principal place of residence for the relative with a disability for whom you are accessing your RRSP funds)
- Neither you nor your spouse can take ownership of the house more than 30 days before the withdrawal of your RRSP funds
Some date restrictions apply as well. The house must be bought or built before October 1st of the year following the year of withdrawal, and you must have no repayable balance due to the Home Buyers’ Plan on January 1st of the year of withdrawal.
You must repay your RRSP withdrawals in the year that repayment is due, or within the first 60 days of the following year. Your repayment schedule will vary according to your personal situation, but you will receive a Statement of Account each year, detailing the amount you must repay and when. If you are eligible for the program, you can download and complete a Form T1036 (Home Buyers’ Plan – Request to Withdraw Funds from an RRSP) from the Canada Revenue Agency website to get started (www.cra-arc.gc.ca). This is a great opportunity for first-time buyers with some RRSP savings to get into the real estate market, and an opportunity that’s definitely worth looking into.
Nelson Goulart
Broker of Record with Signature Service GMAC Real Estate
www.ssgmac.ca
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