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, give me a call.