Buying a house is a considerable investment. It is something that most people will be living in for their entire life, so if you are buying your first house, you want to make sure you can afford it without negatively affecting your desired lifestyle. Most people who have just started buying homes usually have no idea what all of the involved costs are, and they don't even know whether they should be using their RRSP funds or not. Once a buyer learns about the pros and cons of buying a home using the RRSP, they will be more inclined to take this option.
Is it possible for buyers to tap into their RRSP for a down payment?
Yes, it is possible although some conditions apply, which will be unpacked in this video.
Homebuyers can tap into their RRSP for a down payment through a federal program called the Canada Home Buyer’s Plan, in short HBP. All the details are accessible on canada.ca
So this program is available Canada-wide and it is available to you regardless of any mortgage lenders.
Are there any conditions on the type of property?
As of today, there are no such conditions. What matters more is the intended use of the property.
The HBP program only allows home buyers to buy or build a property that will become their principal residence within one year after buying it.
It is not for buying a rental property.
Who this product IS for, and who it IS NOT for?
Who is this product for?
First, this product IS for
- a first-time home buyer or
- someone who has not been a homeowner within the previous four years.
So for those who used to be a homeowner, but in the past four years you have been renting for whatever reasons, you are eligible for the Home Buyer’s Plan.
Second, this product is for someone who is a resident of Canada. To know if your residency status for sure, check the government’s website as canada.ca
Third, they have saved up some savings in their RRSP account and the sum of money has stayed in the account for at least 90 days.
As a home buyer, you could borrow money to deposit into your RRSP account and let the money sit in the account for more than 90 days then use it as a down payment. But the side effect of this maneuver is that you are paying whatever borrowing cost for the money you borrowed. And don’t forget you still have to refund the money you borrowed from RRSP savings within 15 years.
Who this product IS NOT for?
The answer goes back to the intended use of the property. This product is not suitable for those who are looking for
- a rental property
- a second home or vacation home, and cottage
Is this product suitable for a new resident in Canada?
It may be suitable for a new resident, although there is a separate program available that is customized for the new residents called the New to Canada program.
If you are a new resident in Canada, and you have brought your savings with you, you could deposit them into your RRSP, wait for 90 days, then withdraw them for a down payment to buy a house.
But two conditions make this product not best suited for new residents:
- With the Home Buyer’s Plan, buyers have to refund the amount they have withdrawn, in 15 years.
- There is a maximum amount of $35,000 per eligible person possible to be withdrawn from the RRSP account.
Will that be a problem for homebuyers who are buying under the joint-tenant category, but only one of them qualifies for the Canada Home Buyer's Plan?
It is not a problem. This program qualifies each person separately.
So if you have one eligible buyer, then that person can withdraw up to $35,000 from the RRSP account as a down payment.
If you have two buyers who are both eligible, altogether they can withdraw up to $70.000 as a down payment.
Is the money withdrawn from their RRSP account can only be used as a down payment?
The RRSP funds are not strictly for down payment only. Homebuyers can choose to use their savings to pay for the closing costs and upgrades too.
A licensed mortgage broker in Toronto
To learn more from the previous press release, click here.
Mortgage Broker | Matrix Mortgage Global - Jermaine Hinds
Mr. Jermaine Hinds is a licensed mortgage broker with years of experience in the industry. His insight comes from his many years as an agent and lender, which gives him a broad network that offers clients more than 100 different lending partners who are ready to offer various mortgage solutions, including home equity loans, bridge loans, and other specialized mortgages products. Mr. Hinds has two children and one loving wife with whom he spends most of his time when not working or spending time at the gym! His mortgage license is powered by Matrix Mortgage Global (Brokerage Lic. #11108). Those who would like more information about this topic, please call Jermaine Hinds at (647) 998-2767 or Jermaine@mmgb.ca
About Matrix Mortgage Global:
Matrix Mortgage Global is a Toronto mortgage brokerage that has been awarded 4X Broker Of The Year in 2018, 2019, 2020, and 2021. The company is led by the Chief Executive Officer, Mr. Shawn Allen who smashed the $380M mark in mortgage origination amount during the Great Financial Crisis. Mr. Allen is an international speaker and masterclass host for mortgage brokers in Canada and Australia.
