RRSP’s the often forgotten or overlooked giant that can help you make your home buying plan a reality.

Who this article is intended for; those that are looking to purchase their first home or parents that are looking to help their children with down payment for the purchase of their child’s first home. RRSP’s are a great tool for planning for your future, but they are also a great tool for planning on buying your first home. Today, we will address three ways in which you can utilize your RRSP’s to help you increase your down payment on your new home.

Move your down payment to your RRSP

If you are a first-time home buyer and your down payment is not in your RRSP’s then you are leaving money on the table. As s first-time home buyer you are able to withdraw up to $35,000 from your RRSP. If you are holding your down payment in a savings account or TFSA, you are missing out and leaving cash on the table. On average for ever $1,000 you invest into your RRSP, you will get a tax refund of aprox $250.

That means if you invest $35,000 into your RRSP you can expect a return of aprox $8,750 (obviously this is an example and your return will be based on your income and other factors). However in this example we have just turned $35,000 into $43,750. Important to note that your RRSP’s have to be invested for at least 90 days before you take them out in order to qualify for the First-Time Home Buyers program.

Parents plan ahead; don’t wait to gift

If you are a parent planning on gifting your children funds to assist them in the purchase of their new home then don’t wait. Gift those funds now and allow your children to put those funds in their RRSP.

As stated above a first-time home buyer can withdraw up to $35,000 from their RRSP for the purchase of a home. By gifting your child $35,000 you are actually gifting them aprox $43,750 just because you planned ahead.

Taking an RRSP loan to increase your down payment

Normally we would not be telling you to take on debt however as a Mortage Broker we have access to multiple lenders and some lender have cash back programs that can assist you in increasing your down payment if used wisely. Let’s assume you want to purchase a home for $500,000 however you only have $5,000 for down payment and you need $25,000

Here’s what we can do:

Take out an RRSP loan for $20,000 by the end of February. By inviting $20,000 into your RRSP’s you can expect to receive above $5,000 tax return. Then you purchase a home and use one of our lenders that has 3% cash back, meaning that you will receive $15,000 on closing to pay down pour RRSP loan. On closing you will pay your RRSP loan in full with the cash back and the tax refund and you will have your $25,000 down payment required.

As your Mortgage Broker, I’m passionate about ensuring that you have access to all the programs available to make the most of your home buying experience. If you are buying a home or know someone who is purchasing a home, please share this information and as always should you have any questions, please connect with us. ana@askanacruz.ca | Call or text 905-870-0513