Home Buyer's Program
RRSP and mortgage: a winning combination!
Because you probably have a substantial amount in your RRSP that you could use through the Home Buyer’s Plan (HBP) also known as RAP.
The Home Buyer’s Plan (HBP) is a Canada Revenue Agency program that allows you, if you’re a first-time home buyer or haven’t owned a home for the last 5 years, to withdraw up to $35,000 ($70,000 for a couple), tax free, from your registered retirement savings plan (RRSP) to buy or build your home. It’s the perfect opportunity to increase your down payment.
After the second year following your withdrawal, you must begin to repay at least 1/15th of the amount borrowed from your RRSP until you have reimbursed the total amount, over a period of 15 years.
The property to be financed must meet 3 criterias for HBP admissibility:
- must be located on Canadian soil;
- must be purchased or built before October 1st of the year following withdrawal from the RRSP;
- must become the borrower’s principal residence, at the latest one year after purchase or construction.
In order for you to use funds from your RRSP, the amount in question must have been deposited for at least 90 days. You can take advantage of this program more than once, as long as you have completely reimbursed your previous HPB according to the prescribed deadline.
If you haven’t saved up the admissible $35,000 or if you don’t have an RRSP, you can still benefit from the HBP program by taking out a Laurentian Bank RRSP loan.
The process is simple:
- Step 1: Borrow the necessary amount from Laurentian Bank, taking into account your needs and your unused RRSP contributions.
- Step 2: Invest the borrowed amount into a Laurentian Bank RRSP.
- Step 3: After a minimum of 90 days, withdraw the amount from your RRSP as part of the HBP program and reimburse your loan.
- Result: You are now eligible for a tax return that you can apply towards costs relative to the purchase of your home, such as your down payment, notary fees, etc…!
Remember that you must reimburse each 1/15th of the amount borrowed from your RRS P, over a maximum of 15 years.
This mortgage product is for you if:
- This is your first experience as a homebuyer or you have not owned property for the last 5 years1.
- You are divorced.
- You are separated and have been living apart from your common-law partner for at least 90 days.
This product is not for you if:
- You do not wish to use your RRSPs to increase your down payment.
For more information on the new incentive for first-time homebuyers that will be launched in September 2019, visit the Canadian government’s National Housing Strategy website.