In my adult life, I never thought that much about home ownership. My husband and I had rented for so long that it just became our norm. Not to mention, we were living in downtown Toronto until recently, so the houses were slightly out of our price range. And by slightly, I mean insanely! Then we had our daughter, and suddenly the desire to own a family home with a yard became a big deal. Our two big hurdles were the fact that we lived in one of the most expensive real estate markets in the country and we didn’t have a down payment. Enter a big move and the Home Buyers’ Plan.
WHAT’S THE HOME BUYERS’ PLAN?
The Home Buyers’ Plan is a government program that allows you to withdraw funds from your RRSP to buy or build a qualifying home. As long as the funds have been in your RRSP for a minimum of 90 days, you can take out up to $25,000 in a calendar year, and you have 15 years to pay it back. Plus, if you’re buying or building with a spouse/common-law-partner/sibling/friend, then they, too, can withdraw up to $25,000 from their RRSP.
Of course, there are conditions; this is a government program, afterall. But, they’re actually not that complicated or unreasonable. The first stipulation is you have to either be a first-time home buyer or be considered a first-time home buyer as outlined by the program. The Canada Revenue Agency has a great online booklet about the Home Buyers’ Plan that you can download. Be warned, however, that the language is a little convoluted at times. For example,
“You are not considered a first-time home buyer if you owned a home that you occupied as your principal place of residence at any time during the period beginning January 1 of the fourth year before the year of the withdrawal and ending 31 days before the date of the withdrawal.”
Huh? I know. Basically, if you are withdrawing money from your RRSP in 2017, you can’t have owned a home anytime after January 1st of 2013. Even if you sold a home with a closing date of January 2, 2013, you couldn’t withdraw under the Home Buyers’ Plan until 2018.
Other conditions include entering into a written agreement to buy or build a qualifying home, using the home as your main residence, and being a resident of Canada.
REPAYING YOUR WITHDRAWALS
Under the Home Buyers’ Plan, you have 15 years to pay back your RRSP withdrawals. Your repayment period starts the second year following the year you made your withdrawals. So, if you withdraw your funds in 2017, you have to start making payments in 2019. You can begin your repayments earlier, and you can repay more than the yearly amount due (which is 1/15th of what you withdrew).
So, there you have it; the Home Buyers’ Plan at a glance. Again, the CRA website has a lot of great information on the program. You can also ask your mortgage lender for details. All in all, using the program to purchase our first home was a great experience. And now my little one has a place to call her own.