The Pros and Cons of using your RRSP for your next Barrie Home Purchase
Is a Barrie home in your future? If this is something you have been considering, you are probably aware of the need for a 20% down payment to avoid paying mortgage insurance that can be quite costly. If you are trying to figure out where to come up with this money, there is a way. In Canada, first time home buyers who qualify can borrow up to $25,000 from their registered retirement savings plan (RRSP) under the Home Buyers’ Plan and the money is tax free. This may be borrowed to help with down payments and to lower monthly mortgage costs.
 What are the requirements necessary to qualify for the Home Buyer’s Plan? 

· You must be a first time Barrie home buyer.                                                       

· You must occupy the home as your principal residence within a year of buying or building it.
· You must have a written agreement to buy or build the Barrie home.
· You must live in Canada when withdrawing the money.
· All withdrawals from the RRSP must be received during the same calendar year.
When using this method to purchase a Barrie home, you must repay the RRSP withdrawals during a 15-year period. The 15-year repayment starts the second year after the year that the funds were withdrawn. There are advantages and disadvantages to using this method to purchase a home.
 What are the advantages?
The use of the RRSP can allow a sizable down payment which will keep you from being required to pay mortgage insurance and help you obtain a lower interest rate.
 If buying a Barrie home jointly with a spouse of partner, they may also use $25,000 from their RRSP.

 Having a large down payment can result in lower monthly payments on the mortgage of your Barrie home.

 The RRSP loan is a tax-free loan and you will pay no interest on the money for 15 years.

 The Home Buyer’s Plan is a terrific choice for young people who do not have a large savings.
 What are the disadvantages?

 The money withdrawn from the RRSP will result in years of loss of compound growth, depending on how long it takes to reinvest the money.
 If you do not make the repayment each year, the part that is not paid will be taxed as income for that year.

 The Home Buyer’s Plan is a loan. If the money is not repaid as required, you will be jeopardizing your future when it is time to retire.

 In the event, you would have to file bankruptcy you must still make the payment into the RRSP every year.

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Victoria Jacobs

Victoria Jacobs

Sales Representative
CENTURY 21 B.J. Roth Realty Ltd., Brokerage*
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