Michelle's Mortgages in London Ontario: First Time Homebuyers can tap into their RRSPs. Let me show you how!

First-time homebuyers can tap their RRSPs to help with a home purchase

Here’s how it works. If you’ve been contributing to an RRSP, then you already know that the program is designed to set aside money for retirement, with the money going into the program tax-free (paying taxes on the funds when they’re withdrawn later). But there are some valid reasons why you may want to access these funds earlier. A home purchase may be one of them. As a first-time homebuyer, you are allowed to withdraw money tax-free, provided you adhere to the repayment plan. (Just make sure, of course, that your RRSP is not a locked-in plan.) You can withdraw up to $25,000 from your plan. If your spouse qualifies as a first-time homebuyer, then he or she will also be able to withdraw $25,000. Between the two of you, you could possibly have a hefty down payment sum of $50,000. That’s enough to make a substantial difference in the affordability of home ownership!

There are some conditions that you should know about. For example, you must enter into a written agreement to buy or build before you can withdraw money. And you are expected to complete the home purchase no later than October 1 of the year following your withdrawal. In addition, all HBP-eligible withdrawals must be made in the same calendar year, and you can’t have owned the home more than 30 days before the date of withdrawal. Above all, you must meet certain repayment terms. Repayment to your RSP begins the second year following the year of withdrawal. You have up to fifteen years to repay, and each annual repayment must be at least one-fifteenth of the total withdrawal, otherwise you have to include each repayment amount as income for that year.