Down Payment Dilemma? Consider your RRSP.

Are you looking to buy your first home? Are you short on the down payment needed to qualify for a mortgage? That money you’ve been locking away into your RRSP could make the difference. The Canadian government offers borrowers The Home Buyers’ Plan (HBP), which lets you borrow funds from an RRSP to make a down payment for your first home purchase.

How does it work?

• The home has to be your principal residence.
• You can borrow as much as $25,000 from your RRSP to go toward a home purchase.
• You have to live in Canada.
• If you buy with another first time buyer you can both add to make $50,000
• You can’t take contributions to an RRSP out unless those contributions have been in your account for a minimum of 90 days.
• You pay no interest because you’re the one providing the money.
• You have as many as 15 years to pay back what you borrowed out of your RRSP.

Should you consider the HBP?

When you borrow from your RRSP, you’re lending money to yourself with no interest – and you have 15 years to pay it back. This is a lot less expensive than taking out a private loan to cover the difference – those offer short terms and often come with high interest rates. You can only borrow up to $25,000 – but that can often make the difference for many first-time home buyers.

Other Things to Consider

If you’ve owned a home before, you can still be considered a first-time home buyer. If you are trying to build or buy a qualifying dwelling for someone with a disability, or to help someone with a disability build or buy a home, then you can qualify as a first-time home buyer. However, either you or that disabled person has to move into that home as their principal dwelling.

Are you married? Then you can borrow up to $50,000 together ($25,000 apiece). If one of you is not considered a first-time home buyer, though, the other still can take part.

This is only designed to give you basic information. If you need more information about your own situation, you should speak to a Professional in regards to such a major decision, a good mortgage broker, accountant or tax lawyer can help.

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