One of the best sources for funding your mortgage down payment is using a Registered Retirement Savings Plan (RRSP). The Canadian Government’s Home Buyer’s plan allows first time home buyers to borrow up to $25,000 from your RRSP for a down payment. This is tax free! If you are purchasing a home with someone else, you can both access $25,000 from your RRSP. This means that combined you can have access of up to $50,000 ($25,000 each) for a down payment. Since this is considered a loan, it must be repaid within 15 years.
In order to qualify for the first-time home buyer plan you must:
- The RRSP funds you borrow must be in your account for at least 90 days prior to their withdrawal
- You cannot have owned a home within the previous four years
- If you’re buying with a spouse (or common law partner) who is not a first time homebuyer, you cannot have lived in a house they owned for 4 years
- You have entered into a written agreement to buy or build a qualifying home
- You must intend to live in the home within one year of purchase as your primary residence
- If you have used the Home Buyers’ Plan before, you cannot have any outstanding balance due
- You must make the withdrawal from your RRSP within 30 days of taking title of the home
- You must be a Canadian resident
If you make a withdrawal from your RRSP and do not meet the first-time home buyer eligibility, this will be taxed as income and should be included in your income tax as taxable income.
Buying with a partner
If both you and your spouse (or common-law partner) meet the first-time homebuyer eligibility requirements, each of you can withdraw up to $25,000 from your RRSPs for a total of $50,000.
If only you qualify as a first-time homebuyer, you will be able to withdraw the $25,000, provided you have not lived in, as your primary residence, a house owned by your spouse or common-law partner.