The pros and cons of using the Home Buyers' Plan
Coming up with a down payment can be a challenge for first-time home buyers.One option to consider is the Home Buyers’ Plan, which allows you to withdraw up to $25,000 tax free from your RRSP to put towards your first home.
For a first-time home buyer, one of the most difficult things about entering the market is obtaining a down payment. With Canadian home prices averaging over $375,000, a down payment of $75,000 or more would be required to avoid paying for mortgage default insurance and/or to obtain the now rare 30 year amortization period.
One option made available to Canadians is the Home Buyers' Plan. This is a federally instituted government program that allows a first-time buyer (or a buyer who has not owned a home for four years) to withdraw up to $25,000 from their RRSPs to use towards a home purchase. This article from Moneyville details the pros and cons of the Home Buyers' Plan.
A program perk for applicants purchasing a home jointly is the ability for both parties to withdraw up to the maximum $25,000 amount, enabling the couple to maximize their down payment. Those looking into using the Home Buyers' Plan should be aware that there is a time limit to repay the borrowed funds. Buyers have up to 15 years to repay the full amount, and the minimum yearly payment is one fifteenth of the value.
To learn more about the Home Buyers' Plan, contact an Ottawa Mortgage Broker.