1. Buy your first home with the RRSP Home Buyers’ Plan
Will you be a first-time home buyer? You can use your RRSP to help buy your first house.
What can you do under the Home Buyers’ Plan? You (and your spouse if you have one) can borrow up to $35,000 from your RRSP to buy your first home.
As an example, let's say Melissa wants to buy a home in five years. She's planning to save about $20,000 for a down payment by putting away $300 per month.
What happens if Melissa puts that $300 per month ($3,600 per year) into an RRSP? (Assuming she has the contribution room). She'll get a 30% tax savings based on her marginal tax rate. That works out to a tax refund of $1,080 per year.
In five years, Melissa will have $20,000 in her RRSP to borrow for the purchase of her first home. And she'll also have an extra $6,000 from tax savings.
- See how it works: How to use your RRSP to buy a house (infographic)
What happens when you borrow money from your RRSP under the Home Buyers’ Plan? You must pay the money back to your RRSP over a 15-year period.
In Melissa’s case, she must put back $1,333.33 per year for 15 years. She will miss out on future tax-sheltered growth on that $20,000. So, if Melissa has money in a non-registered account, she may want to use that first.
Visit the Home Buyers’ Plan website for more information.