The Federal Government’s First-Time Home Buyers’ Plan (HBP) Revenue Canada will permit the use of RRSP funds for the purchase of a home by a first-time homebuyer (refer to Revenue Canada document P150 (E) for further details concerning the program).
Withdrawal of RRSP Funds for Down Payment:
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The current HBP permits the first-time homebuyer to withdraw up to $25,000 tax-free from their RRSP to buy or build a home. The amount ithdrawn is treated as a loan and must be repaid within a 15-year period, commencing in the third year after the withdrawal. If the annual payment is not made it is treated as taxable income for that year.
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This Program may be used with the CMHC’s First-Home Buyer’s Program (5% down payment program).
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You should plan to pay back 1/15th of the funds drawn per year. If you repay less than 1/15th in one year, the difference from the amount paid and 1/15th of the amount will be calculated as income and taxed at your marginal tax rate.
The following is a sample repayment schedule of a mortgage with an RRSP down payment:
Mortgage Amount:
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Take the Purchase Price: $175,000.00
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Less: 5% RRSP Down Payment $8,750.00
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That gives you the Mortgage Amount $166,250.00
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Add: Canada Mortgage and Housing Corporation (CMHC) 2.5% premium which is $4,156.25
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Total Mortgage $170,406.25
Calculate Payments :
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Monthly Mortgage Payment (at 5% fixed, 5 year term, 25 year amortization) $995
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Add: Monthly RRSP Repayment OR (1/15th of Annual RRSP Repayment of $583.33) $48.61
Total Payments are 1,043.61
Thanks to :
Mark Herman; AMP, B. Comm., CAM, MBA - Accredited Mortgage Professional
Mortgage Alliance - Mobile: 403-681-4376 - 1-866-823-1279
7142- 36 Avenue N.W. Calgary, Alberta, T3B 1T8
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