What is the Home Buyers Plan?
The home buyers plan is a program that allows qualified citizens to borrow money from their RRSPs to go towards the down payment of a new property. As this time, a Canadian resident can borrow up to $25,000 to go towards the down payment of their residence. This can be used towards either a used property or a new property. Once you have taken the funds from your RRSP to be used as a deposit for a property, you must meet certain conditions to apply and you must pay the money back within a certain duration of time.
What Conditions does it take to Qualify for the Home Buyers Plan?
You must be the annuitant of the RRSP in order to make the withdrawal from the RRSP. Also, you can withdrawals from multiple RRSPs as long as you are the annuitant on each of the RRSPs.
You must also meet one of the following conditions:
- You are looking to withdrawal the funds for the purchase or the construction of your first-time home purchase.
- You are withdrawing the funds to purchase or the construction of a home for a family member with a disability.
The conditions to be considered a first-time home buyer are that you or your spouse did not own a property that you lived in as a primary residence for at least 4 years prior to the decision to purchase a property. This means that if you are planning on using the home buyer plan, then make sure you and your wife have not had a mortgage in at least the last 4 years.
You must also meet all of the following conditions:
- You must have a completed accepted purchase agreement to purchase a new, used, or construction phase property.
- You must intend to occupy the property as your principle residence.
- Your Home Buyers Plan repayable balance as of January 1st of the year you want to make a withdrawal is at zero.
- Neither you or your spouse owns the qualifying home at least 30 days prior to the home being sold.
- You are considered a resident of Canada.
- You buy or build the qualifying home before October 1st of the next year.
How to Repay your Home Buyer Plan Redemption
The second year after you had applied for the home buyer plan, then the government will be expecting you to make a contribution to your RRSPs. The government will also expect you to file your taxes with a completed schedule 7. This must be done annually until the home buyer plan is paid off in full.
The first repayment is due the second year following the year you made the withdrawal. Every year, the government will send you a statement account attached to your notice of assessment and your notice of reassessment. This will provide you with the following details: the amount you have repaid, the amount you still have to repay, and the amount of your next repayment. You have up to 15 years to repay the home buyer plan in full, and payments are at a minimum of 1/15 of the withdrawal.
To make a payment, all you need to do is make a regular deposit to your RRSPs, and file a completed schedule 7 with your tax returns. The following year you will receive an updated statement of your account. You may be exempt from making your regular home buyer plan payments if one of three things occur: you die, you turn the age of 71, or you become a non-resident of Canada.
The home buyers plan and the first-time home buyers plan are great ways that Canadians can purchase there first home and receive there first mortgage. It is critical to take advantage of this program when deciding on making your first home purchase and possibly subsequent purchases if you qualify. When you are planning to purchase a home, make sure that you have deposited enough funds into your RRSP so that you can take full advantage of this program. The tax benefits of using it are extreme and you will not get these opportunities again.
Save your Mortgage from the Bank. Simply Mortgages can Help!
Welcome back!
Related posts:
- First Time Home Buyers Having a consistently growing mortgage market, it allows for almost...
- 2009 Canadian Federal Budget; What it means to Homeowners and Future Homeowners With the 2009 Canadian budget fresh off the press, a...
- How to use your RRSPs to Purchase your First Home Your email: In Canada, many people buy their first property...
#1 by Mon B on May 4, 2009 - 9:06 am
I’m a bit confused about this. I have just started to repay my RRSP home buyers plan, now am I going to see that money back in my RRSP account? Cause I haven’t seen it added back to my RRSP account so where did the payment go?
Cheers,
Mon
#2 by admin on May 9, 2009 - 4:10 pm
Hi Mon,
Sorry I haven’t got back to you sooner, but the money should be appearing back into your RRSP account. For some banks, it could take up to 30 days for your online banking to update.
If you want to be certain, then call your bank to confirm that the funds will show up in your RRSP account shortly.
Thanks,
#3 by A on November 4, 2009 - 1:16 am
Question.
if i have no rsp but i have enough money to but a deposit on the house anyways am i better off doing that. Or am i better off putting all the money into my rsp and maxing it out ie. 25000 as well as $25000 on my partners to buy our first house. the way i look at it ill be paying 2 mortgages off on to (rsp the gov) and one to the bank. Can you explain the tax benefit of either one in detail please. I am a temporary resident, that legally works here.
With that said if my partner who is canadian and I leave to go live somewhere else for say 5 years, do our payments on rsp then get put on hold?
thanks for your time
#4 by Top Home Loans on November 4, 2009 - 1:19 pm
Hi A,
Thanks for the questions.
If you have the money available to put into RSPs, and you don’t mind waiting for at least 6 months to purchase the property, then I would suggest putting the money into RSPs before making the purchase.
This will give you a big tax benefit when you do your taxes next year. Depending on your tax bracket, you may get up to 40% of the money you put into your RSPs when you do your taxes.
With the repayment, you must repay it in full within the designated timeframe even if you leave the country.
Thanks,
THML