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Ontario|Investments & SecuritiesRRSPs and RRIFs 269 Borrowing money from an RRSP to buy a home The RRSP Home Buyers Plan allows you to borrow money from your RRSP to buy or build a home. There are five main rules that apply to the plan.
- Maximum withdrawal of $20 000
First, you can withdraw a maximum of $20,000 from your RRSP. If you have money in more than one RRSP, you can withdraw money from all of them, up to the limit of $20,000 in total. If you have a spouse who is also eligible for the Home Buyers Plan, you can each withdraw $20,000 from your RRSP, for a total of $40,000. The money you withdraw must have been in your RRSP for at least 90 days.
- Must be a first time home buyer
Second, the Home Buyers Plan is only available to first time home buyers. You are only eligible if (i) neither you nor your spouse currently own a home, (ii) you will live in the home being purchased as your principal residence and (iii) if neither you nor your spouse have owned a home in the past five years. In most cases, a home buyer can only use the plan once in their lifetime.
- Must enter into an agreement to buy or build a home
Third, you must enter into an agreement to buy or build a home before you can sign up for the RRSP Home Buyers Plan. Both new and existing homes that are located in Canada are eligible for the Plan. You must intend to live in the home within one year of buying it. The home can be a detached or semi-detached home, a townhouse, a condominium, a mobile home, shares in a cooperative housing corporation, or an apartment in a duplex, triplex, fourplex, or apartment building.
- Specify that the withdrawal is to buy a home
Fourth, when you withdraw the money from your RRSP, you must specify that you are making the withdrawal to buy a home. You must fill out a Canada Revenue Agency form called Form T1036. This form is available from a Canada Revenue Agency office.
- Repay the money to your RRSP over 15 years
Fifth, you must repay the money you withdraw from your RRSP over a period of not more than 15 years. You will not have to pay income tax on the money you withdraw as long as you replace it within 15 years. Because you already received the tax benefit for the money you withdraw, your replacement payments must be made with your after-tax income. The repayment period begins two years after the year in which the withdrawal is made.
If you want to participate in the Home Buyers Plan, or if you are not sure whether you are eligible for the Plan, you should talk to a Realtor or a financial advisor and refer to Canada Revenue Agency's publication.
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