Saving for a downpayment is the largest hurdle to buying a home for first-time buyers. One way of sourcing funds is the Home Buyers’ Plan (HBP), through the federal government, says Penelope Graham, managing editor at Zoocasa.
“The Home Buyers’ Plan makes it easier for first-time home buyers to get into the housing market. A tax-free way to access savings otherwise set aside for retirement in a Registered Retirement Savings Plan, the HBP can be a great way to help with a downpayment to buy a resale or newly built home,” says Graham. “It can be especially effective for contributors who have been saving long term, or perhaps enjoy RRSP matching through an employer pension.”
Eligible individual buyers can take a maximum of $35,000 from their RRSP savings, or, if two individuals are buying together and both qualify as first-time home buyers, they can each access the maximum to a total of $70,000.
“To be eligible as a first-time home buyer, the Government of Canada requires that you have not owned a home, or occupied one that your spouse has owned, in the four consecutive years before this home purchase is made,” says Graham. “However, there are exceptions in the case of a marriage or common-law relationship breakdown where former partners can restore their first-time buyer status.”
A signed agreement to purchase or build a home is required and participants must live in the home as a principal residence, within one year of its purchase or completion.
“As well, the HBP funds must be sheltered within the RRSP for a minimum of 90 days before they can be accessed,” says Graham. “They also need to be repaid to the RRSP in annual installments made over a 15-year timeline.”
For more information go to www.canada.ca and follow the links.
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