RRSP HOME BUYER’S PLAN
When you take advantage of the Government’s Home Buyers Plan when applying for a Surrey mortgage, you are essentially creating a tax-free loan from yourself using the equity you’ve saved in your RRSP. It is important to follow all the rules and time restrictions to avoid unwanted tax and payment penalties.
In order to be eligible as a first-time home buyer, you must meet the following criteria:
- RRSP funds you borrow must be in your account for at least 90 days prior to withdrawal
- You cannot have owned a home within the previous four years
- If you’re buying with a spouse (or common law partner) who is not a first time home buyer, you cannot have lived in a house they owned for 4 years
- You have entered into a written agreement to buy or build a qualifying home
- You mush intend to live in the home within one year of purchase as your primary residence
- If you have used the Home Buyers’ Plan before, you cannot have any outstanding balance due
- You must make the withdrawal from your RRSP within 30 days of taking title of the home
- You must be a Canadian resident
If you make a withdrawal from your RRSP, but do not meet the first-time home buyer eligibility requirements, this withdrawal will be taxed and you must include it in your income tax statement as taxable income.
Buying with a partner
If both you and your spouse (or common-law partner) meet the first-time home buyer eligibility requirements, each of you can withdraw up to $25,000 from your RRSPs for a total of $50,000.
If only you qualify as a first-time home buyer, you will still be able to withdraw the $25,000, provided you have not lived in, as your primary residence, a house owned by your spouse or common-law partner.
How the process works
It’s important to note that any funds you withdraw for the home buyers’ plan must be in your account for 90 days prior to your withdrawal.
Don’t forget you must make the withdrawal within 30 days of taking title of the home. If you try to make the withdrawal more than 30 days after you take title of the home, your withdrawal will no longer be eligible for the HBP and you will be taxed on the amount you withdraw.
Finally, beginning 2 years from your purchase of your Surrey or GVRD area home, you must make annual payments over 15 years to pay back the loan to your RRSP. Canada Revenue Agency will send you a Notice of Assessment, which will indicate the amount of the loan you have repaid, the balance left to be repaid, and the amount of your next payment. To start repaying the loan, you must make a contribution to your RRSP in the year the repayment is due or in the first 60 days of the following year.