If you are planning on purchasing a house or condo sometime in 2018 now is the perfect time to do some serious planning on how to best gather the money you’ll need for your down payment.
What is the Home Buyers’ Plan? (HBP)
The HBP is a Federal government program initiated in 1992. The HBP has helped millions of Canadians to purchase homes and to build homes and therefore has played and does play an integral part in Canada’s economic growth .
Simply, the HBP allows you to use your RRSP money as part of your down payment funds to purchase a home or to build a home.
Think of it as an interest free loan to yourself paid back over 15 years interest free.
HBP Main Criteria:
* You, your spouse or your common-law partner cannot have owned a home as a principal residence in the last 4 years.
* If you have already participated in a HBP the balance is zero on Jan.1 of the year you plan on making another withdrawal . ie. you cannot have more than one plan open.
* The funds must be in a designated RRSP account for a minimum of 90 days.
* The money must be used no more than 30 days after your closing date.
* The money must be paid back over a 15 year period using straight line amortization. eg. If you withdrawal $15,000 then each year for 15 consecutive years you must repay $1000.
* You can overpay any year if you like however since it is interest free think again.
* If you underpay any year the difference is taxable.
* The first payment will be the second year following the year of the withdrawal.
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