Home Buyers' Plan: Fulfil Your Dream to Own
The Home Buyers' Plan (HBP) is a winning formula that enables you to withdraw funds on a tax-sheltered basis from your registered retirement savings plan (RRSP) to put toward the purchase of your first home.
You qualify for the HBP if neither you nor your spouse has owned a primary residence within the past five years.
Under the terms of the HBP, you may withdraw up to $20,000 from your RRSP ($40,000 for couples) tax-free to put toward purchasing or building a first home. You can consequently use this as a down payment on your home and then take up to 15 years to pay back the funds withdrawn from your RRSP without interest.
This winning formula can thus help you fulfil your dream to own while also making it possible to maximize your RRSP contributions.
Not enough money in your RRSP?
Do not let lack of retirement funds prevent you from reaching for your dream. There is a solution: the HBP Loan. To qualify for an HBP Loan, you simply need to provide proof of approval of your mortgage by a financial institution.
Under the terms of an HBP Loan, you can:
· Take out a loan up to your ceiling contribution amount (by claiming unused RRSP contributions from as far back as 1991).
· Deposit the funds in an RRSP for 90 days.
· Withdraw the funds from your RRSP after 90 days to repay the loan.
· Receive an income tax receipt and use your tax refund as a down payment on your first home.
· Take advantage of a two-year grace period after you obtain an HBP Loan before starting to repay your RRSP over 15 years.
Financial leverage
A residence is more than simply a place to live. You can use your primary residence as a powerful wealth-building tool.
A recent study demonstrated that 91% of home owners and 79% of renters believe that purchasing a home is a sound investment.* The assets from a home can be used as economic leverage to finance a range of projects, including repaying debts, financing high-return investments, paying for children's schooling or putting a down payment on an apartment building. This is because a loan against the net value of a house represents the most advantageous form of credit.
The recent status of the real estate market has bolstered this reality: the market value of real estate has increased by 17% over the last two years and by 200% since 1980.*
This only reaffirms the soundness and relevance of your decision to own. The financial tools are available to you to fulfil your dream.
Find out more about the Home Buyers' Plan today. It's a winning formula!
Denis Losier is President and CEO of Assumption Life. He prepared this report in collaboration with Paul LeBlanc, Director of Marketing, Assumption Life.
* RBC Financial Group, 12th Annual Housing Study, March 2005.
