The Home Buyers Plan (HBP) is a program run by the Ontario government which helps first time home buyers take up to $25,000 from their RRSP tax free in order to finance the purchase of buying or building a home for yourself, or a related person with a disability.
A partner who also qualifies as a first time home buyer can also withdraw and contribute up to $25,000 - adding up to a potential $50, 000 per household to put towards the down payment of your first home.
To withdraw the funds from your RRSP you must be using it to contribute to the purchase of a qualified home. What counts as a qualifying home? It's much easier than it sounds.
So long as the home is located within Canada, and it will be your principal residence within one year, that home will qualify for the first time Home Buyers Plan. This applies to properties of all types - condos, detached homes, semi-detached homes, etc. If you are building a home, ensure that the home will be completed construction within one calendar year.
To withdraw the money from your RRSP, it must have been in the RRSP for at least 90 days before the date you withdraw the funds. Removing funds from your RRSP before the 90 days have passed will result in penalties. You are also required to have a written agreement to build or buy a home before you can withdraw.
Repaying Your Withdrawal
The repayment process must begin no later than two years after the date of the withdrawal. To repay you have up to 15 years, with a repayment occurring annually. Each payment should be, at minimum, one-fifteenth of the total. Otherwise you must include each repayment as income for that fiscal year.
Purchasing A New Home
If you are interested in buying your first home and are finding the process overwhelming, rest assured that Team Davids is here to help. Below we've put together a free Home Buyer's Guide to help you navigate the home buying process much more easily. If you're ready to find the home of your dreams, connect with us today.