RRSP Home Buyer’s Plan: The Good, the Bad and the Ugly

Canada is a great place to live, so no wonder our real estate has generally been a great long-term investment. If you’re thinking about when and how to purchase your first home, you may have already heard about something called the RRSP Home Buyer’s Plan (HBP).

In short, the HBP lets you borrow up to $25,000 from your own RRSP account on a tax-free and interest-free basis to put towards your first home. You have 15 years to pay yourself back. What are the ins and outs of the program? Let’s jump into it.

The Good

It used to be that, if you had savings in your RRSP and wanted to buy a home, there was no easy way to access your money. You’d have to make an RRSP withdrawal and pay tax on the money, which would seriously cut into your spending power.

Thanks to the program, you can now get your hands on tax-free money to fund your home purchase. If you have a partner, they can do the same, and now you have $50,000 to work with.

Even if you have other sources of savings to put towards a home purchase, it may be worth getting that extra bit of funding to have a down payment of 20% or more of your purchase, because that will help you avoid paying extra mortgage insurance premiums.

Should you delay buying a home until you have that magical 20% down payment? That’s a tricky question, but in most cases, it’s probably worth going ahead even with a lower down payment. Buying a home is a great way to use a relatively small amount of money (your down payment) to control a very valuable, tax-free investment (your home). We don’t have a crystal ball here, but if history is any guide, becoming a homeowner sooner rather than later is a good ide