How to use your RRSP Funds to buy a home!

First, you must be considered a first time buyer. This is defined as an individual who has never owned a home in the past 5 years. If you are married and either spouse has owned a home in the past five years this could disqualify you from the first time status.

You are allowed to withdraw up to $20,000 per person to use for the purchase of a home. These funds can be used for the down payment, legal fees, land transfer tax and any other expenses related to the purchase of the home.

You have up to 15 years to repay the funds you withdrew from your RRSP. Typically you would pay back one-fifteenth of the amount of the funds you withdrew each year. If you choose not to repay the RRSP one year you would be taxed on the minimum amount of the RRSP you were required to repay.

It is not advisable to repay more than the minimum required back into your RRSP as this payment is not tax deductible. You would be much better off repaying the minimum and putting any additional RRSP contributions into your regular RRSP plan.

In recent years, some lending institutions have promoted the idea of borrowing money to put into your RRSP fund, then using the tax refund as your down payment. Unless this money would equal more than 25% of the price of the home, you would need CMHC insurance, and they consider this scheme illegal. Their number one rule is: you cannot borrow the down payment.

For more information, contact me, I have helped many first-time buyers with their first home purchase.