Of Prime Interest: RRSP home buyers plan

RRSP can be a great source of funding for your mortgage down payment

Saving up for the down payment for your first home often feels like an impossible task but the good news is that a Registered Retirement Savings Plan (RRSP) can be a great source of funding for your mortgage down payment and can help you achieve your dream of home ownership much sooner.

The idea behind saving for a down payment within your RRSP is this: If you make a contribution to your RRSP account this will generate a tax refund. The size of the refund from Canada Revenue Agency (CRA) depends on how much you contributed and what your income was for the last year. If you take this refund and deposit it to your RRSP account your savings will grow much quicker as compared to saving after tax dollars within a regular savings account.

An additional benefit of saving within an RRSP is that the federal government’s Home Buyers’ Plan (HBP) allows Canadian residents to withdraw money from their RRSP on a tax free basis to buy or build a qualifying home. Keep in mind the investments within your RRSP must allow for the withdrawal. In order to participate in the HBP you must be a first time home buyer, a person with a disability or you are helping a related person with a disability buy or build a qualifying home. A first time home buyer also includes those persons who did not own and occupy a home at any time within the last four calendar years. If only one of the partners owned a home in the last four years, the other partner may still be considered a first time home buyer and eligible for the tax free withdrawal.

Under the HBP you can use up to $25,000 of your RRSP savings ($50,000 for a couple) to help you finance your down payment on a home. Your RRSP contributions must be on deposit for at least 90 days before withdrawing and you must have a signed agreement to buy or build a qualifying home. You do not have to make the withdrawal(s) all at one time but they need to be made all within the same year.

CRA requires that the loan is repaid within a 15 year period with the repayment to start two years after you have purchased the home. For example, if you bought a home in 2014 and withdrew $25,000 from your RRSP account, your minimal annual repayment would be $1666.66 (which is calculated by dividing $25,000 by 15) and would start in 2016. Further information can be found on the Government of Canada’s website at www.cra-arc.gc.ca/hbp/.

Of Prime Interest is a collaboration of mortgage professionals and we welcome your questions. Trish Balaberde (250-470-8324) , Darwyn Sloat (250 -718-4118) and Christine Hawkins (250-826-2001).

Just Posted

Pavement Patty slows drivers near Rutland Elementary

New survey reveals unsafe school zones during 2018 back-to-school week

Kelowna church closes and makes room for Starbright

Starbright Children’s Development Centre meeting need for space with major real estate purchase

Black Mountain / sntsk‘il’ntən Regional Park starts to take shape

Student volunteers from three local schools work on trail building project

Kelowna’s Pleasure Painters to host day of art

The annual art sale will take place Oct. 20

Fire ignites at Kelowna homeless camp

No one was hurt in the incident, RCMP are investigating the cause of the fire

Your morning news in 90: Sept. 20, 2018

Tune in for 90 seconds to get the top headlines for the Okanagan, Shuswap and Similkameen.

The longest week: Carolinas worn out by Florence

Frustration and sheer exhaustion are building as thousands of people wait to go home seven days after the storm began battering the coast.

Vancouver councillors move ahead with policy for duplexes on detached home lots

Mayor Gregor Robertson says the decision is another step toward adding homes in the city for the so-called “missing middle.”

Canada’s goal is to play in a medal game at World Cup in Spain

The 2014 women’s world basketball championships were a coming out party for Canada.

World Anti-Doping Agency reinstates Russia

There was no mention of Russia publicly accepting a state-sponsored conspiracy to help its athletes win Olympic medals by doping.

Nanaimo’s Tilray pot stock continues rising, firm now worth more than $21 billion US

The B.C. company’s shares have risen more than 1,000 % since its initial public offering in July

Fresh-faced Flames fend off Canucks 4-1

Vancouver drops second straight NHL exhibition contest

VIDEO: B.C. deer struggles with life-preserver caught in antlers

Campbell River resident captures entangled deer on camera

Most Read