If you're a first-time buyer with a home purchase in your near future, you might want to consider taking advantage of the Federal government's Home Buyers' Plan (HBP).
In a nutshell, the HBP allows each buyer (provided they're both first-timers) to use up to $25,000 of their RRSPs as a down payment towards a home that is going to be their primary residence. This is a great opportunity for first-time buyers to accumulate a larger down payment than they would have been able to otherwise. That's because any money you put into an RRSP is tax-deductible. If you sock money away in it - and then sock away your respective tax return - the amount will quickly add up. It's also forcing you to save for retirement - something you may not be thinking about right now.
As for the details, the program is pretty straight-forward. Here's how it works:
- You're not required to pay taxes on the $25,000, as long as you pay the balance back within 15 years. You're required to start making payments in the second year after you purchase the home. Minimum annual payments are 1/15 of the total amount borrowed.
- If you're buying a home as a couple, and one person has already owned a home, then only one half of the couple is considered a "first-time homebuyer" and eligible for the program. The one exception is if the previous homebuyer sold their home a minimum of four years earlier and hasn't owned another one since. In that case, they're eligible again.
- The home has to be a primary residence, so you have to plan to live in the home yourself within one year of purchasing it or building it.
For more information on the HBP, visit the Canada Revenue Agency's website at: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/menu-eng.html or feel free to give me a call!
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