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The Pros and Cons of Using the RRSP’s Home Buyers' Plan


Coming up with a down payment can be a challenge for first-time home buyers. The average price for a home in Ottawa reached $362,837 in May 2012, meaning would-be home buyers need a minimum of $18,000 for a down payment.

One option to consider is the Home Buyers' Plan, which allows you to withdraw up to $25,000 tax free from your RRSP to put towards your first home. It can be beneficial to use the Home Buyers' Plan to top-up your down payment to 20 per cent and avoid paying CMHC fees.

While the Home Buyers' Plan can help get you into the real estate market sooner, you should be aware of the possible downsides of missing a repayment and using your RRSP savings before retirement.

Using the Home Buyers' Plan

If you are buying a home jointly with your spouse, you can both withdraw up to $25,000 from each of your RRSP accounts.




You're considered a first-time home buyer if neither you nor your spouse owned a home during the four calendar years prior to the year of withdrawal, and up to 30 days before the withdrawal.

Loan repayment under the Home Buyers' Plan begins in the second year following the year of the withdrawal. You have up to 15 years to repay the full amount of the loan, and the minimum payment each year is one-fifteenth of the loan value.

If you don't make a full payment in a calendar year, the unpaid amount will be fully taxed as income in your hands.

It's important to note that if you make an RRSP contribution, you can't make a withdrawal under the Home Buyers' Plan within 90 days of that contribution or your ability to claim a deduction for the contribution may be restricted.

The Home Buyers' Plan is a good option for the first-time home buyers who have already invested in RRSPs and don't have much savings outside of their retirement account. Just keep in mind that borrowing from your RRSP means you'll miss out on up to 15 years of tax-sheltered growth.

For more information on the Home Buyers' Plan, visit the CRA website.

By Robb Engen


June sales indicate consistency in the Ottawa market

Members of the Ottawa Real Estate Board (OREB) sold 1,660 residential properties in June 2012 compared with 1,719 in June 2011, a decrease of 3.4 percent. There were 1,896 sales in May 2012.

"Although there is a slight decrease in the number of residential properties sold this June, compared to June 2011, it seems to be the norm throughout the years", said OREB's President. "For the past years, with the exception of June 2011, sales have consistently and marginally decreased from May to June. This shows stability in the market and also represents a continued steady market", he added.

The average sale price of residential properties, including condominiums, sold in June in the Ottawa area was $352,800, a slight increase of 0.1 percent over June 2011. The average sale price for condominium-class property was $278,447, an increase of 0.8 percent over June 2011. The average sale price of a residential-class property was $373,756, a slight decrease of 0.4 percent over May 2011.





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