There are various options, however I am going to touch upon using your RRSP's towards your downpayment.
First and foremost RRSP, standards for Registered Retirement Savings Plan. Under revenue Canada, this is called the Home Buyer's Plan (HBP). Under this amazing saving plan, you can withdraw up to $25,000.00 to buy or build a home.
Each individual who is on title of your home, has the same option to withdraw up to $25,000.00. Therefore, you could possibly have a downpayment of $75,000.00 (3ppl x $25,000.00). With these withdraws they must meet Revenue Canada HBP conditions. Once met, the money will not be included in your income and therefore won't be taxed in the year you withdrew the funds.
The funds in which you withdraw has to be have been in your RRSP account for a minimum of 90 days before you can withdraw the funds without paying any tax. This programs allows you to withdraw the funds all at once or you can do a series of withdraws as you see fit.
The HBP program stipulates that once the money is withdrawn. You have up to 17 years to repay it back to your RRSPs. The first 2 years are free. As a notable mention, you will not get a tax deduction for the HBP amounts that you repay to your RRSPs. (*New Homes GTA February 6-20, 2010, Mortgage Finesse)
Each year as a rule of thumb, you should repay a portion that is equal to the total amount that you withdrew and divide that by 15 (number of years) after the home was purchased. If this amount isn't paid, than the amount is added to your income for that current year.
For more information, please contact us. We have financial advisors to answer any question that you may have about this program.
Take care,
No comments:
Post a Comment