- WHAT IS THE HOME BUYER’S PLAN:
The home buyer’s plan is a program that was started by the Government of Canada that allows individuals to use the funds allocated in their RRSPs for the purchase of a new home, granted they are first time home buyers. This purchase can be done for themselves, or a related disabled person on a qualified home.
With the home buyer’s Plan, it allows first time home buyers to withdraw up to $25,000 in RRSPs and slowly, over time, pay back into the RRSP (tax free!) for a maximum of 15 years.
- WHO CAN QUALIFY FOR THE HOME BUYER’S PLAN:
Any individual who is purchasing a property for themselves or a related disabled person is able to participate in the home buyer’s plan. It is extremely important to note that the only individual allowed to withdraw funds from the RRSP is the individual who is a designated annuitant.
Money can be withdrawn from more than one RRSP, granted that the individual’s RRSP is not locked and it is actually possible to withdraw funds from said RRSP.
- WHEN DID THE HOME BUYER’S PLAN IMPROVE:
The Government of Canada has actually been allowing individuals to use their RRSPs for the purchase of their property for a bit, but beginning in February of 2009, the previous maximum amount of $20,000 has been increased to $25,000.
- HOW CAN YOU PARTICIPATE:
Your first step is to check the Ministry of Revenue website, which has all the information and conditions associated with the home buyer’s plan. This plan applies only to first time home buyers that are purchasing a property for themselves or a disabled individual.
To start participating in the home buyer’s plan, form T1036 is filled out and submitted to the Ministry of Revenue. This form can be found online: http://www.cra-arc.gc.ca/E/pbg/tf/t1036/README.html
- SOME THINGS TO KEEP IN MIND:
- The individual looking to use their RRSP as down payment must be a Canadian citizen
- An Agreement of Purchase & Sale must be in place
- The home cannot be owned for more than 20 days prior to going through the Home Buyer’s Plan
- The home MUST be occupied by the month of October the FOLLOWING year. For example, Sally uses the Home buyer’s Plan to purchase a property that is being built in June 2009 and withdraws funds from her RRSP at that time. For the Home Buyer’s Plan to be valid, she must occupy the property by October 2010.
- When repaying your RRSP, you will get a yearly statement with your Notice of Assessment (or Re-Assessment) that you owe, as well as a suggested amount to repay.
- WHY SHOULD YOU CONSIDER USING THIS PROGRAM:
Everyone knows that buying a house isn’t the cheapest thing. In fact, it is probably one of the most important investment individuals make. Having RRSPs that can be used towards the purchase price can help alleviate a lot of the associated costs.
- WHERE CAN YOU GO FOR MORE INFORMATION:
Your best resource for information regarding the Homebuyer’s Plan can be found online at the Ministry of Revenue website. It outlines all of the requirements as well as all the stipulations associated with using RRSPs towards the purchase of a property: :http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/cndtns/menu-eng.html
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