Buying a Home for the First Time: Use Your RRSP Without Penalty

If you want to buy a home for the first time or if you haven't owned a principal residence for at least 5 years, you can withdraw up to $60,000 from your RRSP, without penalty, through the Home Buyers' Plan (HBP). This program can help you finance the purchase of your new house or condo.

Let's take the example of Sébastien. He has been working for a company for 5 years and contributes to an RRSP through a payroll deduction. Without realizing it, Sébastien has accumulated $25,000 in his RRSP.

Sébastien recently became interested in a condo worth $300,000, and he learned that he only needed $15,000, or 5%, to acquire it. Since he didn't know he could withdraw from his RRSP without penalty and only had $5,000 in his checking account, he postponed the project until he had accumulated the necessary funds.

It was a colleague of Sébastien, after hearing his story, who recommended he contact a mortgage broker for help in his buying process. Sébastien was then explained that he could withdraw part of his RRSP with the HBP program to purchase his condo. Sébastien withdrew $15,000 from his $25,000 accumulated. He used $15,000 to pay for his purchase and then applied the remaining $5,000 to the related purchase fees. Sébastien will have to repay the amount withdrawn from his RRSP over a period of 15 years. However, this period will only start in five years. He will therefore have to pay $1,000 per year for the repayment. If, for some reason, he couldn't put this $1,000 per year back into his RRSP, he would have to add this amount to his income tax return.

Share this message with your acquaintances! You might be able to help someone without knowing it! For any information about mortgage loans, feel free to contact one of our brokers.

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