When considering purchasing your home there’s one thing that the majority of people are concerned about, that is having enough for a down payment on a property. Have a 20% down payment of the purchase price on a home is most preferred. If you don’t have a 20% down payment, then a 5% down payment option is available. When you have less than a 20% down payment you are required to have mortgage insurance through CMHC to be able to qualify for your mortgage.
Nonetheless if it’s a 5% or 20% down payment, the government of Canada allows home buyers to use their RRSPs to purchase a home without a penalty for withdrawing the RRSPs. This home buyer option is called Home Buyer’s Plan or HBP.
But before you withdraw your RRSP, the following conditions must be met:
The maximum amount you can withdraw from your RRSPs per year is $25,000.
The withdrawn amount from your RRSPs must be repaid within 15 years.
Each year, you have to repay the amount specified on your notice of assessment from the previous tax year. If it isn’t repaid, then it is included as income.
Repayment starts the second year that you made your RRSP withdrawal.
Repayment is done by contributing to your RRSPs. When you fill out your income taxes, you must include the contribution amount of your RRSPs minus the amount required to repay the Home Buyer’s Plan.