Are you looking to buy your first home?
Here are two accounts that can help you save for and purchase your first home.
Under the Homebuyers’ Plan (HBP), you can withdraw up to $60,000 from your Registered Retirement Savings Plan (RRSP) as a first-time home buyer. If you qualify, the withdrawn funds will not be included in your income. To qualify, you must be a Canadian resident, a first-time home buyer, and have a written agreement to buy or build a qualifying home. Repayment begins in the second calendar year following the withdrawal, and you have up to 15 years to repay the full amount.
For example, if you withdraw the full $60,000, you will need to repay $4,000 per year back into your RRSP over 15 years. Repayments must be designated as repaying the Homebuyers plan when filing your taxes, and you do not get to make it as deduction on the repayment.
The second option is the First Home Savings Account (FHSA). This account allows you to contribute up to $8,000 per year, to a lifetime maximum of $40,000. Like an RRSP, your initial contributions are tax-deductible. Your investment growth inside the account is tax-free, and when you use the funds to buy your first home, they are not included in your income if the house qualifies as your first home. The one major benefit of the First Home Buyers plan (FHSA) compared to the Homebuyers plan (HBP) is that you do not need to repay the withdrawal.
In total, that is $100,000 in earmarked savings between the Homebuyers plan and First Home Savings plan that you can put to work for your first home. If you and your partner are both eligible first-time buyers, you could combine up to $200,000 across your accounts as a down payment.
Everyone’s situation is unique, so consider this a starting point for your research and planning. You will need to confirm whether you qualify as a first-time owner and double-check whether you still qualify if you have a partner who has a property or owned property in the past. You can review the details through the CRA site at CRA definition.
If you have any questions about your specific situation, a Cumberland Wealth Advisor is available to answer your questions.
*Cumberland and Cumberland Private Wealth refer to Cumberland Private Wealth Management Inc. (CPWM) and Cumberland Investment Counsel Inc. (CIC). This communication is for informational purposes only and is not intended to provide legal, accounting, tax, investment, financial or other advice and such information should not be relied upon for providing such advice. The communication may contain forward-looking statements which are not guarantees of future performance. Forward-looking statements involve inherent risk and uncertainties, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. All opinions in forward-looking statements are subject to change without notice. Past performance does not guarantee future results.
