RRSP for first time home buyers in Canada: What to know about the Home Buyers Plan

In this video we talk about RRSPs in
buying a house — how can you use your RRSPs to buy a house — how long does
it take to repay — what are the advantages and more.
That’s starting right now. Welcome to Homebuyer’s School, brought to you by Brookfield Residential. – Hi everyone I’m Karl, welcome to
another Homebuyer’s School video, a channel where you get
the latest strategies tactics and tips from home buying experts, and
remember if this is your first time on this channel and you want to get the
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little notification about so you don’t miss anything. So today I’m joined by
Mujtaba Syed, mortgage specialist with the Bank of Montreal, and the question
we’re gonna answer today—well actually the topic we’re gonna talk about today
is RRSP and mortgages. So Mo, let’s go— let’s just really make it really basic—
let’s go really simple—what is an RRSP? – So RRSP Karl, is a Registered
Retirement Savings Plan. So the government actually came up with this
program to kind of promote people to save for their retirement. So the way it
works is that it is a registered product investment vehicle that we call it, and
then every year when you do your taxes that you were given a contribution room—
this is the amount of dollars that you can put in. The way it works is that when
you put this money into a register retirement savings plan, usually you get
a tax certificate from the lender or from the institution that’s taking it
and you can actually help that—actually offset some of your taxes and that’s how
the government has promoted that. So to get some money back from your taxes to
kind of promote people to save for their retirement. – So in terms of home buying,
can you use your RRSP to buy a house? – So in a usual scenario taking
money out of a registered product like RRSP, there’s usually withholding tax and
there’s a lot of other implications that are not advisable. So if you work, if
you’re putting money into an RRSP, definitely have a chat with your with
your banker with your financial advisor to see what your future goals are
with that money, because sometimes it might be more difficult to get it out but
the only two times that the government actually lets you take money out for an
RRSP as a first-time homebuyer which is a great program,
and the other one’s called lifelong learning plan—and there
are some stipulations to that but if you decide to go back to school, you’re a
mature student, you need funds, you can actually take money out from your RSP as
well without any tax implications or reporting as income for that year. – So how much can you take out from your RRSP as a first-time homebuyer? – So previously it was 25,000
per individual. So for a couple it would be a maximum
of 50,000. Well based on the new budget that just came out with the homebuyer
incentive, they actually did raise that as well. So it actually raised to 35,000 per individual, so a total of 70,000 per couple. I think that’s—it’s up to 35,000. – Okay and remember if you want to know more about the first time homebuyer
incentive program that the government just came out, watch our video above and
in the description below. So you can borrow up to $35,000 now right when
that program rolls out. So can I use this outside of being a first-time homebuyer
can I use my RRSP to buy let’s say a second house? – So technically, before you
couldn’t, but the new home bar incentive program has made it really easy now for
us to be able to take money out—and there’s some requirements. The
requirements are that you need to for example, let’s say you’re buying—you’re
re-locating for work and you need to buy a new home. You have
access to your first-time home buyers plan. Let’s say the death of a spouse or
you get divorced from your spouse and you want to purchase a new home for
yourself and you’ve already used the first-time home buyers plan, you can do
it again, or to help an elderly relative it can be your parents if
they’re elderly, a grandparent, any immediate family that kind of falls into
that criteria you can actually take out a first-time home buyers plan to
actually help them as well. So previously no, but now yes. They actually made
the rules a little bit more relaxed to get more people into homeownership. – How do you repay the RRSP once
you’ve taken it out? – So the requirement right now is it’s payable over 15 years. So the first
time that you take it you have to pay it back after 15 years. So after 15 years
if you don’t pay it back, there’s no such penalty but the amount will just get
added back to your income every year and just end up paying tax.
It could be minimal, it could be lot. That’s the conversation to have
with your accountant. – And how long— so this whole program is called the
first-time homebuyer, it’s not the first-time home buyers plan right,
the the ability to use your RRSP for first-time homebuyers right? So that’s
what it’s called, the First-time Home Buyers Plan which is very different than
the First-time Homebuyers Incentive Program which they just announced.
Can I use my RRSPs to buy a home more than once? Or are you only
allowed to use it once? So you can buy more than once
depending on the stipulation that we talked previously about. So let’s say if
you’re relocating for work, you can use it again in the the event of the death of a
spouse or if you’ve been divorced from your spouse and you want to buy a home
you can do that again, or if you want to take care of an
elderly relative—like you want to purchase a home for them as a secondary
home, you can use it for that. So you definitely can use them
more than once in these scenarios. –So what are the advantages
of actually using the RRSP or the the first-time home buyers plan
for a down payment? – I think it’s a great program,
a great incentive. So every time you put money into this registry product
or RRSP, you get money back from the government. As we all know it’s almost
really difficult to get your money back from the government. We pay taxes,
and then this is the only real way of getting money back from your
taxes and to kind of really promote that saving. Now there’s no other program that
you can actually pull this money ou tax free yes except a first-time homebuyers
plan. So in this scenario I would recommend that if you have some time,
definitely start investing into your RRSP now if you have some money in savings
and your plans in the future are to purchase a home, definitely put those
funds in RRSP, have a conversation with your specialist, with your lender
to see if this is the right thing to do.
The stipulation is that before you can actually access those funds for a
first-time home buyers plan,they have to be in the RRSP account for at
least 90 days. So if your possession date is coming prior to 90 days, or you
need access to those funds prior to 90 days, maybe RRSP is not gonna work
because it’s going to be locked. But other than that it’s a great program, a
great way to get money back from the government. Could even help you save
money towards your down payment with the tax rebate that you get at the end of
the year and overall—and repayable with 15 years, it’s almost
like it’s a no-brainer. But it seems very easy thing to do for
such a great program. – All right. Do you have
anything else to add? – I think a lot of clients are
not too familiar with the first-time home buyers plan. I do get a
lot of my clients calling me and asking me about that. As soon as I sit down with
the client at the time of a pre-approval they still have some time before they’re
looking at buying, that is the first thing I definitely bring up during our
conversation is — do you have an RRSP — have you invested into an RRSP and then I
go into great detail explaining the benefits of RRSP. So if you don’t know about an
RRSP, definitely reach out to your bank, your financial advisor, to your specialist,
and ask them what is the first-time home buyers plan—what is an RRSP—how will it
help me in my scenario—and they can go into in detail. But it’s definitely a
product that you should know about and get to know a lot about. – Great. So the question of the
day I have for you is, have you or are you planning to use this
first-time home buyers plan, and if so did it help?
Were you actually able to afford the house or the home—your dream home
using the first time homebuyer plan? Let us know in description below. Thank you
very much for joining us, and remember if you enjoyed this video and found it
helpful, make sure to LIKE as well as leave a comment, and subscribe. Thank
you and we’ll catch you next time. That’s another edition of Homebuyer’s School. Tune in next time for more expert tips and tricks, and visit homebuyersschool.ca to bring you one step closer to finding your dream home. As with everything, it would be great if you like and share our videos, also please let us know if you have any home buying questions you want us to answer.

1 comment on “RRSP for first time home buyers in Canada: What to know about the Home Buyers Plan

  1. Have you or are you planning to use this First-time Homebuyer's Plan, and if so, did it help? Were you actually able to afford the house or your dream home using the First-time Homebuyer Plan?

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