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Mortgage Funds from Your RRSPs
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It is possible to borrow money from yourself. Tax regulations now permit the owner of a Registered Retired Savings Plan (RRSP) to borrow mortgage funds for his or her own property from his or her own RRSP, provided that they have entered into an agreement to purchase or construct a home that:
Is to be the primary residence for a first-time home buyer, who may be either spouse in a marriage or common-law relationship;
- Is located in Canada;
- Was not previously owned by the member or member's spouse;
- Will be acquired by October 1 of the year following the withdrawal; and
- Is intended to be occupied as the member's principal residence not later than one year after acquisition.
Eligible homes include detached houses, semi-detached houses, townhouses, condominiums, mobile homes, or apartments in duplex, triplex, fourplex, or apartment buildings. Shares in co-operative housing corporations also qualify. Renovations or land purchases do not qualify for the program.
Income tax will not be owed on the withdrawal as long as it is repaid to an RRSP in equal installments over the next 15 years.
The repayments will not be tax deductible. Revenue Canada sends Plan participants an annual statement indicating the annual deposit required.
As of March 2, 1994, the Plan can only be used by first-time home buyers. An individual qualifies if during the year of withdrawal under the Plan and the four previous calendar years:
The individual did not own a home that was the individual's principal place of residence;
- If the individual is married, while married the individual did not live in a home that was owned and occupied by the present spouse; and
- The individual did not make an RRSP contribution at least 90 days prior to withdrawal.
Who can use the Home Buyer's Plan?
You are not restricted to taking the money from one RRSP. In fact, you may withdraw from any number of RRSPs, with different institutions, as long as the total withdrawals do not exceed $20,000.
You are required to repay (to any RRSP) the amount withdrawn, without interest, in scheduled equal payments over a 15-year period commencing in the second calendar year following your withdrawals. Revenue Canada issues you an annual repayment schedule. The schedule provides:
- The amount left to repay to the RRSP;
- Notice of the scheduled annual repayment; and
- A summary of the repayment made up to the date of the statement.
If:
- you repay less than the specified amount in a year
- you will be taxed on the portion you did not repay.
- If you repay more than scheduled
- your payment in subsequent years is reduced.
- If you die or become a non-resident
- the unpaid balance or taxes will be taxed as a lump sum in that year.
A surviving spouse can take over repayment.
No, except in the case where the agreement to purchase or construct the home is not completed (that is, where participation in the plan has been cancelled). In this situation, the funds must be repaid to the originating issuer.No. You may continue to make yearly RRSP contributions and receive the tax deduction, as well as making repayments to the Plan. Repayment is not considered an RRSP contribution.
This information was provided by RE/MAX House Calgary.
Other financial information:
Mortgages |
Mortgage types
Mortgage funds from your RRSP |
Glossary of terms
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