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Can you use your RRSP for your down payment?

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Saving for a down payment can be an overwhelming prospect, but there are programs available to help you. The Home Buyers’ Plan is a federal program allowing first-time home buyers to withdraw up to $35,000 from their RRSP to use as part of their down payment.

Who qualifies as a first-time home buyer?

Even if you or your spouse owned a home previously, it is possible you may still qualify as a first-time home buyer under this program. To qualify, you cannot have occupied a home you or your spouse owned in the previous four years.

Important things to keep in mind

You are required to pay back the funds you withdraw from your RRSP. You have up to 15 years to do so, and the period begins the second year after you withdrew the funds. If you purchase a house in 2022, you will begin re-paying in 2024. Every year, you will have an annual amount that must be re-paid, though you are able to re-pay more if you prefer, which will lower the amount owed in subsequent years.

To re-pay the Home Buyers’ Plan withdrawal, simply make a contribution to your RRSP and designate the appropriate amount as re-payment on your tax return.

If you don’t re-pay some or all of the balance due in a calendar year, it must be included as income on your tax return, and you lose that RRSP contribution room, which can hurt you in retirement. Before taking advantage of this program, ensure you are prepared to re-pay the funds that you take out annually.

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