How to save money as a first time home buyer.

How to Save Up to $10,000 in Income Tax as a First Time Home Buyer

The answer is the “RRSP Home Buyer’s Plan”.

Now, you may be thinking: What is the RRSP Home Buyer’s Plan, and how can it be used to lower my taxes when purchasing a home? Allow me to explain.

RRSP Home Buyer’s Plan (HBP)

The Home Buyer’s Plan allows you to withdraw up to $25,000 from your RRSP savings account tax-free for the purpose of a down payment. This is a great advantage as it allows you to put extra money towards your down payment and start with a bit more equity in your home. It also allows you to save up a portion of your down payment quicker than a regular savings account, since you are not getting taxed on the contributions you make. Moreover, any interest you gain in your RRSP savings account will not be taxed. The only stipulation is you are required to replenish the amount you take out back into your RRSP account. This is done with equal yearly installments over the next 15 years. To take advantage of the Home Buyer’s Plan, it is recommended to start using your RRSP account to save up a down payment as early as possible. Also, if you are purchasing the property with a partner, they are eligible to withdraw up to $25,000 from their RRSP’s as well. This means as a couple, you are eligible to withdraw up to $50,000 from your RRSP’s for the purpose of a down payment!

Eligibility Conditions

  1. Cannot have owned a home in the previous four years
  2. Must intend to be living in the property within one year of the purchase
  3. The withdrawal needs to be made within 30 days of taking title of the property
  4. The money your withdrawing must be in your RRSP account 90 days prior to making the withdrawal

If you would like more information on the Home Buyer’s Plan, click here.

For anyone unfamiliar with RRSP’s I have defined it below.

What is an RRSP?

A type of savings account that allows you to postpone the deferring of taxes on earned income you contribute towards it. For example, if you earned $60,000 before paying taxes, and contributed $5,000 towards your RRSP savings account, your income tax will be calculated on $55,000 instead. If you were to decide you wanted to withdraw money from your RRSP account, the amount you withdraw would be added to your earned income in the year you make that withdrawal. For more information on RRSP accounts click here.

If you have any other questions related to this article, or any other mortgage related topics, please either send me an email at sameer@spmortgage.ca, or give me a call at 778-822-5466. I am ALWAYS available for you!

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Hardworking, Ambitious & Detail-Oriented, Sameer can be counted on for any financing needs you may require. Working in all aspects of financing(residential, commercial and private), Sameer has a passion for helping his clients, and making the mortgage process as smooth and stress free as possible.

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