Stephanie Corcoran

More good news for your First Time Home Buyers

Down Payment - RRSP Home Buyers Plan (***NEW 2009 Federal Budget Update*)  Use Your RRSP for a Down Payment

The Home Buyers’ Plan (“HBP”): This is a government program designed to assist “qualified buyers” to obtain a down payment from their Registered Retirement Savings Plan (RRSP) to purchase real estate, build a qualifying home for yourself or a person with a disability.

§  As a “qualified buyer”, you are allowed to withdraw funds from your RRSP to use as a down payment for the purchase without incurring a penalty.

§  You can participate in the HBP more than once.  To re-participate in the HBP, your balance from your previous withdrawal must be fully repaid by the beginning of the year you want to reapply. 

§  The government also allows people with disabilities to participate in the HBP to buy or build a more accessible home.

Home Buyers’ Plan Guidelines

§  ***Prior to January 27, 2009 the maximum amount an individual could withdraw in a calendar year from their RRSP was $20,000. However, the new 2009 budget proposes to increase the maximum amount to $25,000.***

§  The purchased home must be owner occupied.  Rental property purchases do not qualify.

§  The RRSP must be repaid within 15 years with minimum annual payments of 1/15^th of the withdrawn amount.

§  You must not have owned a principal residence within the past 5 years immediately prior to participating in the HBP.

§  Funds must be in an RRSP for a minimum of 90 days, prior to participating in this program.

Income Tax Refund:

§  The “HBP” also permits an individual to establish an RRSP with borrowed funds, and then use the resulting tax refund for a down payment. 

§  In this scenario, the individual borrows funds that are contributed to an RRSP.  After a 90-day period, the RRSP is collapsed to repay the loan.  When the individual receives their tax refund, it can be applied to the purchase of a new home. 

§  These funds are considered as an acceptable source of down payment provided that the tax refund is the individual’s hands at the time of closing and the lender can verify that the borrower has other, liquid assets equal to 5% of the purchase price.  The borrower must apply for the HBP withdrawal through their RRSP issuer, prior to completion. 

▪ ▪ ▪Funds must be available just prior to the completion date, to use for the down payment.  Please Note: Some issuers may take up to 10 days to liquidate the RRSP, and usually transfer the funds directly into your bank account. ▪ ▪