If you are planning to use your RRSP'S to help finance the downpayment on the purchase of your new home these are some of the things you will need to know:
Canada Revenue Agency publication titled Home Buyer's Plan is a valuable resource to assist you through the process.
The Home Buyer's Plan publication contains information on:
- how to participate in the Home Buyer's Plan,
- how to make repayments and also,
- explains what the rules are.
Home Buyer's Plan publication also contains the form you require to make the withdrawal from your RRSP for your home purchase.
What are the advantages of using your RRSP's for a downpayment to purchase a home?
- You may be able to increase the amount of money you are able to put down on the purchase price
- If you can increase the amount of your downpayment you will pay less interest over the life of your mortgage
- You can withdraw the RRSP funds tax free if you are using the funds to purchase or build a home
- You will have fifteen years to repay the RRSP funds
- Repayment doesn't begin until the following year after you've purchased your home
- If you don't have the funds to repay the RRSP you can take an equal amount into income for the next fifteen years
- You will be able to build equity in your home faster if you put more down when you first buy the house
What are the advantages of using the full fifteen years to repay the RRSP?
- debt free sooner is the biggest advantage I can think of, if you use the additional funds you would have used to repay the RRSP quicker as a lump sum payment towards the principal of your mortgage.
- You may be able to shave several years off your mortgage by using any extra funds as lump sum principal payments
- Most financial institutions will allow you to repay up to 20% of the original mortgage amount per year towards the principal of your mortgage
To calculate several different repayment scenarios in regards to making lump sum repayments on your mortgage check out The Financial Consumer Agency Website www.fcac-acfc.gc.ca
The Financial Consumer Agency of Canada has a mortgage calculator on their website:
www.fcac-acfc.gc.ca/Tools/Mortgage/PaymentCalc/MortgagePayment_e.asp
Other interactive tools related to mortgages on The Financial Consumer Agency website:
Find out if you qualify for a mortgage by using the FCAC Mortgage Qualifier Calculator at
www.fcac-acfc.gc.ca Click the following links: Consumer's / Credit, Loans & Debt / Mortgages to find the mortgage qualifier calculator
Test your Mortgage Knowledge by taking the Mortgage Quiz at
www.fcac-acfc.gc.ca Click the following links: Consumer's / Credit, Loans & Debt / Mortgages to find the Mortgage Quiz.
