Great news for first-time buyers! In mid-March, the federal government delivered the 2019 budget, which included an increase to this popular incentive program.
Housing availability and affordability have become increasingly difficult for many Canadians, which is why the mortgage and real estate industries have been vehemently lobbying government to implement initiatives to help aspiring homeowners.
In an attempt to address the challenges many first-time homebuyers face, the federal government has proposed some new policies including this increase to the Home Buyers’ Plan.
How much can I withdraw?
The latest budget proposes that first-time buyers be able to borrow up to $35,000 from their RRSPs to put towards their first home purchase. This is a $10,000 boost from the previous limit of $25,000 set 10 years ago. The increased amount of $35,000 is per person, so you and your spouse or partner would be able to withdraw up to $70,000 combined to help buy your home!
Typically, if you withdraw funds from your RRSP, they’re subject to tax and interest. Through the Home Buyers’ Plan, however, the funds are withdrawn tax- and interest-free and must be used to finance the purchase of an existing home or a new home being constructed.
How does the plan work?
To withdraw funds from your RRSPs, you must complete a request form, which is available on the Government of Canada website: www.canada.ca. You can withdraw a single amount or make a series of withdrawals within the same calendar year. Your mortgage agent can guide you through this process.
While the limit you’re allowed to withdraw has increased, it’s important to note that the repayment period itself has not been extended and remains at 15 years. The repayment period starts the second year after the year you withdraw the funds. You can, however, repay the full amount back into your RRSPs at any time.
When you file your taxes and receive your annual notice of assessment, you’ll also receive a statement of account detailing repayment amounts for your RRSPs, the remaining balance as well as the amount you can contribute for the year ahead. While your repayments don’t affect your RRSP contributions, you can’t claim repayments as a deduction on your income tax.
Have questions about the Home Buyers’ Plan or your mortgage in general? Answers are a call or email away!