There are a lot of people that really want to buy a home and are contemplating on using their RRSP as their source for being able to do this. What they’re not sure of is whether this is a wise move or really how to go about it.
There are a few rules that you must meet before you can even utilize these funds for doing this. You may not have owned a home for the last four years that you used as your principal residence ,and this applies to your spouse or common-law partner as well. You can use the funds however, if you are buying or building a home for an individual that is disabled and related to you.
The other thing to keep in mind as well is that you cannot use all of your RRSP for this purpose. The maximum amount that you can withdraw for this purpose is $25,000. What you have to remember however, is that even though this money is not taxed when you take it out you must pay it back into your registered retirement savings plan within a 15 year period. This has to be done on a yearly basis so each year you must pay $1667 back into your RRSP for the next 15 years. This is based on if you took out the max of 25,000. This doesn’t mean that you have to pay it back into the same RRSP institution that you took it out of, however.
In order to make the withdrawal from your RRSP under the homebuyers plan you have to have a written agreement that you are buying the home for yourself or a related person with a disability. Just getting preapproved for a mortgage does not qualify you. You also have to show that you are going to be living in this home that you are purchasing with the RRSP funds within one year after your purchase or building of it.
While there certainly is the possibility to use these funds you really need to take a close look at your circumstances now and try to foresee the future as to how financially sound you will be. Age factor is going to play a big role in this particular decision. If you have been building your RRSP’s to help with your retirement years then you need to look at your age now and if you are getting close to retirement is it a wise move to be using these funds to purchase a home.
If you are not close to retirement and do not foresee the need for your RRSP in the near future then this may be a viable option for you to use these funds rather than have to borrow money that would come with an interest rate even if it were a low one at that. But you do have to keep in mind that along with the mortgage payments that you are now going to have you still have the yearly payment that you must make back into your RRSP. If you’re not sure if this is a wise move for you to be making you might want to discuss it with your family accountant to get his opinion on the matter particularly if this expert is familiar with your financial situation.
