Did you know that you could withdraw up to $35,000 from your RRSP without penalty to use in acquiring your new home or condo if you are a first-time home buyer or if 5 years have passed since you last owned of your principal residence ?

For example, Gabriel has been working at the same place for 5 years, which enabled him to contribute to an RRSP through payroll deductions. Without even noticing, Gabriel had soon accumulated $15,000 in his RRSP.

Recently, Gabriel wanted to buy a $200,000 condo. He learned that the minimal down payment was 5% or $10,000 in this case. Since he didn’t know he could withdraw his RRSP without any income tax penalties if the withdrawal was for a first-time home purchase, he put off his acquisition project for later because he had only $4,000 in his savings account.

After telling his story to a colleague, his colleague suggested he meet with me to get more information concerning his acquisition project. I explained to him that with the HBP Plan (Home Buyers’ Plan) he was entitled to withdraw part of his RRSP for the purchase of his condo. So Gabriel withdrew $12,000 from the $15,000 in his RRSP account; he made a $10,000 cash deposit on his condo and used the remaining $2,000 to cover the cost related to his purchase.

The HBP Plan requires that an RRSP withdrawal must be repaid over a period of 15 years, starting two years after the home purchase. In Gabriel’s case, the annual amount comes to $800 a year. If he decided not to follow an $800 reimbursement schedule in his RRSP account, this amount would be added to his annual revenue in his income tax declarations.

To find out more about mortgage loans and the different options that you can benefit you, don’t hesitate to contact me, or one of our expert agents.

If you know someone planning on buying a condo or a property, send them this tip. It could help them!

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