Chances are that you have heard that your Registered Retirement Savings Plan (RRSP) can be used to buy a home but you may not be aware of just what that entails.
Referred to as the Home Buyers Plan by the Canada Revenue Agency (CRA), this program allows for each person listed on the title to withdraw up to $25,000 of their RRSPs to be put toward a home.
You have the option of withdrawing the full $25,000 all at once or through a series of withdrawals as long as they fall within the same year. However in order for the money to be eligible it must also have been in your RRSP for at least 90 days.
Once the $25,000 has been withdrawn you will need to begin repaying it the following year. You can generally expect to be repaying at least 15 per cent of the borrowed amount annually to ensure that it’s paid in full before the 15 year allotment is up. It’s important to note that there is no tax liability incurred when making repayments. Take advantage of bigger tax deductions by making large repayment contributions to your RRSP now while you’re still earning a high income.