For first-time buyers, the biggest challenge is often how to come up with the down payment. While it's possible to buy a home with as little as five percent down, the ideal recommendation would be to put down at least twenty percent of the purchase price. How to come up with these funds? Financial planners often advise pay yourself first. When it comes to buying a home first-time home buyers may want to consider the suggestion, "borrow from yourself first". This can be achieved by using the monies saved in your Registered Retirement Saving Plan (RRSP) as the down payment of a property.
Canadians who have never owned a home or haven't owned their primary residence for at least five years may qualify to withdraw up to $25,000 (tax free) from their RRSP to put towards a home through the government's Home Buyers' Plan. (For more detail go to http://www,cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/menu-eng.html.) Funds withdrawn under this plan are not subject to income tax as long as the funds start to be repaid back into the RRSP two years after withdrawing it, are repaid at a minimum of 1/15 per year and are completely repaid within 15 years.