Saving is a lifestyle habit that helps with the realization of milestones, like buying a new home. The Registered Retirement Savings Plan (RRSP) in Canada allows you to have an organized savings system with reduced tax, and comfortable deductions based on your personal interests. This plan can then be channeled towards different things like health, education, and in this case, housing.
RRSP has several programs that allow individuals to withdraw from their RRSP accounts to fund major expenditures like a new car, tuition or their first home. For new homeowners, the RRSP program has the following features.
Total deductible amount
Depending on how long you have been operating your RRSP account, you should know the age of maturity for funds that are accessible/ can be withdrawn. Usually, it must have been up to 90days of saving that specific amount before you can request to withdraw it. For the homebuyer plan, you can withdraw $35, 000 (Thirty-five thousand dollars) to fund your home purchase, while as a couple, you and your partner can withdraw a total of $70, 000 (Seventy thousand dollars) as full- or part- capital for your new home.
Verifiable agreement for home/land purchase
While processing the funds from your Registered Retirement Savings Plan account to deposit is an important part of the procedure, it is also important that you get a signed agreement before you can buy or build a home. The agreement must also indicate that the home you are buying/building meets the required standards. This validates you as befitting of the benefits of the homebuyers’ RRSP program.
No tax disadvantage
One of the best advantages of the RRSP is that there are no additional disadvantages when it comes to tax –as long as you remain on track with the repayment, and pay up within fifteen years. The best way to ensure this is by being careful not to use the funds from your RRSP as full-capital unless you have the earning power to pay back within the stipulated timeframe.
Fixed repayment schedule
To help you make your repayment stress free, you can set up a weekly, monthly or bi-monthly savings plan that will be your fixed schedule for paying back the withdrawn amount within the stipulated time. The payment schedule also helps you know your deficit so you can always plan your finances rightly.
Knowing the pros of using RRSP to fund your new home is great, but you should carefully think it through before getting started. How secured is your income? Will you be able to maintain the repayment? Is it worth losing all possible future benefits?
If you are certain of your choice then no need for further delay, contact your RRSP account manager today.