Canadian RRSP Home Buyers Plan
If you are interested in purchasing a home in Calgary, ( search Calgary MLS Homes for sale) you might want to take advantage of the Home Buyer’s Plan option that has been made available by the federal government. With this plan, you can use up to $25,000 of your RRSP savings to help finance the down payment on your home. Or, if you are a couple that is looking to buy a home in Calgary, you can use your RRSP savings for up to $50,000 toward a down payment. Before you take advantage of this option, however, it is important to understand how to qualify as well as the pros and cons of utilizing your RRSP savings as a down payment on a home.
How to Qualify to Use RRSP Funds for a Down Payment on a Home
In order to use your RRSP funds toward a down payment on a home, the funds that you are using must be on deposit for at least 90 days. Furthermore, you must provide a signed agreement to either build or purchase a qualifying home.
Exploring the Benefits of Using RRSP Funds Toward a Down Payment on Your Home
There are many benefits to using RRSP Funds toward a down payment on a home. Among these are:
- You can utilize existing resources to obtain the 20 percent down payment necessary to avoid default insurance premiums
- Your withdrawal will not be taxed as long as you repay it within 15 years
- If you have money saved for a down payment, putting it in your RRSP account at least 90 days before purchasing the home will allow you to remove the funds from your account and then take a tax deduction on the funds you withdrew
To make the process of repaying your RRSP, you can set up automatic monthly, bi-weekly or weekly contributions to the fund. This way, you can be sure you don’t miss any payments. Keep in mind that you must pay at least one-fifteenth of the amount you withdrew each year in order to stay in good standing.
Exploring the Cons to Using RRSP Funds Toward a Down Payment on Your Home
While there are many benefits to using your RRSP to help make a down payment on a home, there are also potential downsides. For example, depending on the rate of return you are getting on your current investment, it may not be a financially wise decision to withdraw a large amount of money from your account. You also need to consider whether or not you will be able to repay the required amount each year and if it is worth trading the future tax sheltered growth potential of your RRSP in exchange for obtaining a down payment on a home.