Buying a house can be a great investment, but finding the cash to do so can be hard. The Home Buyers’ Plan (HBP), a program offered by the Government of Canada, is one way to help you make the big move, but there are a few things you need to know before you take the next step.
1. What is the HBP?
The Home Buyers’ Plan is a government program that facilitates the purchase of your first home by allowing you to use part of your Registered Retirement Savings Plan (RRSP) as a tax-free, cash down payment.
2. How much can I withdraw?
Each spouse can withdraw up to $25,000 from his or her RRSP, tax-free. These amounts can be withdrawn from an RRSP from any financial institution, including the Fonds de solidarité FTQ. If each spouse wants to put down more than $25,000 in cash, he or she will have to save that money in another financial product to achieve that goal.
3. How do I find out if I am eligible?
To determine your eligibility for the HBP, simply fill out the appropriate Revenue Canada form. If you are buying your home with your spouse, each of you must fully comply
with the requirements.
4. When can you ask to withdraw the money?
The money you want to withdraw must be in your RRSP for 90 days before you can withdraw it through the HBP. Plus, all withdrawals have to be received within the same calendar year.
5. How long do I have to use my withdrawal?
You have 30 days from the signing date of the RRSP withdrawal to use the money.
6. How much can we save up each year through the Fonds de solidarité FTQ?
The additional 30 percent savings in income tax afforded to you by an FTQ RRSP means that in only five years, you could save up to $25,000 with only a $10,375 investment (which is about $80* per pay).
7. When do I need to pay back my HBP?
The government gives you two full calendar years before you need to start paying back your HBP. You have up to 15 years to complete the payments.
*This example is valid if your annual income is $40,000, your income tax rate is 28.5 percent, you receive 26 paycheques per year and the deposits qualify for the instant payroll tax savings