RRSPs Not Just for First Time Buyers

Use your RRSP to help you get back into the real estate?!? Many of us know that we can use our RRSPs to help us buy a home when we buy our first home, but did you know that an RRSP can be used in certain cases to help buy a second home. Read on to learn more.

First a recap of the “The first time home buyer RRSP Plan”, for those of who meet the eligibility criteria,  a withdrawal up to $25,000 is allowed to be made their RRSP without penalty to help with the home purchase, and for a married couple that’s $25,000 each. So a total $50,000 from RRSPs can be used for your home purchase, without taxation.

A brief explanation of RRSPs, money contributed into an RRSP saves us taxes, $50,000 into an RRSP can give a couple an additional up to, $23,000 in tax refund.****

• You must intend to live in the qualifying home as your principal place of residence within one year after buying or building it. If you buy or build a qualifying home for a related person with a disability, or help a related person with a disability buy or build a qualifying home, you must intend that that person lives in the qualifying home as his or her principal place of residence.

The problem for many of us is its only for FIRST time home buyers. Or is it?

Actually, a little known fact, this plan can be used even if you’ve owned a home in the past. According to the government home buyer information page available on the wesite http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/cndtns/menu-eng.html

“ You are considered a first-time home buyer if, in the four year period, you did not live in a home that you or your current spouse or common-law partner owned.

Note

Even if you or your spouse or common-law partner has previously owned a home, you may still be considered a first-time home buyer.

The four-year period:

Begins on January 1 of the fourth year before the year you withdraw funds; and

Ends 31 days before the date you withdraw the funds.

For example, if you withdraw funds on March 31, 2015, the four-year period begins on January 1, 2011 and ends on February 28, 2015.

If you have a spouse or common-law partner, it is possible that only one of you is a first-time home buyer.
 

Can you participate in the HBP later?

If you are not considered a first-time buyer now, you may be considered a first-time home buyer later, once the four-year period has passed.

For example, if in 2009 you sold the home you lived in before, you may be able to participate in 2014. Or if you sold the home in 2010, you may be able to participate in 2015.”

So now a person who left the real estate market in 2010, and sold their primary home they can now use $25,000 from their RRSPs again to buy another house in 2015, or in the case of a couple $50,000.

We ourselves, or most likely we know someone who, may have had sold their house several years ago, for many reasons, divorce, financial hardship, health or several other reasons, and have not been able to afford to come back into the real estate market, but now they can. They can take advantage of this great opportunity provided by the government. 

Studies suggest that first time buyers are fueling the market according to CANADIAN ASSOCIATION OF ACCREDITED MORTGAGE PROFESSIONALS. Even with the housing market prices currently at an all-time high, those purchasing a home for the first time are making up 45 per cent of the 620,000 homes sold over the past two-plus years in Canada.

Please pass this information on to anyone you think it will help and contact me immediately to get started on this plan to owning your dream home.