Super Hall of Fame Top Producer Albert Lai
905-272-3434
Re/Max Realty Specialists Inc., Brokerage
allai@trebnet.com



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  RRSP Home Buyer’s Plan

The First-time Home Buyer's Plan (HBP) is a Federal Government initiative providing Canadian citizens the opportunity to withdraw up to $20,000 from personal registered retirement savings plans (RRSPs) for buying or building a home in Canada. To qualify, applicants must not have directly, or indirectly, owned a residence within the past five years.

Under the HBP, qualifying withdrawals will not be included in annual income, and RRSP issuers will not withhold income tax from these withdrawn amounts. If you are jointly buying or building a home together with your spouse or other qualifying individual, each of you can withdraw up to $20,000.

To withdraw these funds from your RRSPs, you must first have entered into a written agreement to buy or to build. You will also need to confirm that you will occupy the subject property as your personal residence. (Once you take occupancy there is no minimum period of time you are required to live there.)

Your commitment to the HBP is to repay the amount withdrawn within a 15 year time period. In each year, you will need to make the minimum contributions to your RRSPs equal to 1/15 of the withdrawn funds until the total amount is repaid. You will receive a HBP Statement of Accounts on your annual Notice of Assessment showing you the total HBP withdrawal, the amount you have repaid to date, your HBP balance, and the amount you should repay the following year. Your repayment starts the second year following your withdrawal, and you may repay any amount in excess of the minimum to reduce payments in later years.

Details

  • Up to $20,000 per person could be withdrawn tax-free from RRSPs to buy or build a principal residence. Couples —including common-law — will be able to withdraw up to $40,000.

  • You have to meet the first-time buyer’s condition. You are not considered a first-time home buyer if you or your spouse owned a home that you occupied as your principal place of residence in the past 5 years. To determine past 5 years, the 4 years preceding the year you make your withdrawal plus the period in the year you make your withdrawal ending 31 days before your withdrawal is the rule adopted.

  • Home buyers withdrawing funds do not have to pay income tax on the amount withdrawn, as long as the funds are repaid into an RRSP in the future.

  • The 15-year repayment period will begin in the second calendar year following the calendar year in which the withdrawal is made. In addition, a qualifying home must generally be acquired before October 1 of the calendar year following the year of withdrawal. For example, those making withdrawals under the plan in 2000 will have until October 1, 2001 to acquire a qualifying home and their first annual repayment will be due by the end of 2002 or the first two months of 2003.

  • A special rule denies a tax deduction for contributions to an RRSP that are withdrawn within 90 days of the RRSP deposit being made. Consequently, to get the normal tax break for a contribution and to use those funds under the plan, the money must be in your RRSP for at least 90 days before a withdrawal is made.

Existing homeowners can use the HBP to purchase a more accessible home or a home for a disabled dependent relative where the individual withdrawing the funds:

  • qualifies for the disability tax credit (DTC) and is buying a home that is more accessible for the individual or is better suited for the care of the individual;

  • is related to a disabled individual who qualifies for the DTC and is buying a home for the benefit of the disabled individual that is more accessible for, or better suited for, the care of the disabled individual, or;

  • is related to a disabled individual who qualifies for the DTC and is withdrawing an amount for the disabled individual to buy a home that is more accessible for, or better suited for, the care of the disabled individual.

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