R.R.S.P. Home Buyer Plan – RRSP Program
First Time Buyer
First time home buyers find it difficult to secure good deals. Hence, the Canadian government provides financial assistance to first time home buyers through the RRSP Program. This program is applicable to only first time home buyers. Or you or your spouse/common law spouse must not have bought a home that you lived in during the past 5 years. In case you do, this program can be restarted after a tenure of 5 years. Prior to withdrawing RRSP funds for a home, you must have an Agreement of Sale and Purchase in written.
This home (purchased from RRSP fund) must be used as your principal residence in Canada within a period of one year after closing the deal on the purchase.
You must be a Canadian resident during the time period of RRSP funds withdrawal till the date of the purchase of the home. The home in question can be a new built property or a resale.
RRSP Requires Clean Past Record
You should not owe any amount to RRSP prior to your new RRSP purchase.
90 Day Deposit
The funds in the RRSP must be deposit for a period of at least 90 days prior to the purchase under the program.
30 Day Withdrawal Period
You have to withdraw the RRSP funds within 30 days. That means once you have purchased the house, you have to withdraw the money within 30 days or the funds may not be available. In case there are multiple withdrawals, you have to complete it in the same calendar year.
Multiple Uses for RRSP Funds
These funds can be used for many purposes such as land transfer tax, down payments, legal fees and other disbursements or for furniture etc.
Tax Free Withdrawal of Maximum $25,000.00 per Buyer
A maximum of $25,000.00 can be borrowed tax free from the R.R.S.P. funds. For couples, this amount if limited to $50,000.00. Such withdrawals do not fall under the tax bracket and are therefore exempted from tax at the time of withdrawal.
Following an initial grace period of one year, after the year of the withdrawal, you have to start paying back the funds obtained from the RRSP. These have to be paid in 15 years and yearly equivalent to 1/15th of the initial amount withdrawn.
Pre-payments can be paid any time and there is no penalty for doing so. In case, you miss an installment, you cannot pay it back immediately. This missed payment will be included in your yearly taxable income and deducted accordingly. Additional re-payment regulations may apply if the person availing RRSP dies or leaves the country or surpasses 70 years of age.
Get in touch with our real estate legal expert at 905-405-0199 to know about RRSP program.