Helping First Time Home Buyers Understand Their Financial Options
Buying a home is most likely one of the biggest purchases you will make. It’s an important investment, so it’s essential you understand how your finances are allocated before, during and after the transaction.
At Blackburn Lawyers, we can appreciate this is not a transaction that the average person experiences on a daily basis. Fortunately, we have been assisting first-time home buyers throughout Richmond Hill, Ontario since 1975. We offer our experience to help clients understand the financial resources applicable to their situation.
Using Your RRSPs Toward The Purchase Of Your New Home
First time home buyers as defined by Revenue Canada may qualify to use up to $25,000 from their RRSPs toward the cost of purchasing a home to be used as their principal residence. You must take possession of the home within one year of the purchase taking place. If you meet all the requirements when the money is withdrawn from your RRSP you are not taxed on the amount withdrawn as would normally happen.
Breaking Down The Complexity Of The RRSP Benefit
The definition of a first-time buyer in this situation is rather complex. It does not necessarily mean you have never owned a home previously. To see if you qualify, you should make reference to the questionnaire on Revenue Canada’s website. You must however repay all the money back into your RRSP within a 15-year time limit, generally by paying 1/15 of the amount withdrawn each year. If you do not make a required payment the amount of the payment will be included in your income and you will be taxed on it.
Qualifying For the RRSP Benefit
The money you are withdrawing from your RRSP must have been invested in the plan for at least 90 days before it is withdrawn. You must be a Canadian resident. You must be purchasing the home pursuant to a written agreement of purchase. Neither you nor your spouse can own the home for more than 30 days before the funds are withdrawn from the plan. You must complete the required form at the time of making the withdrawal from your RRSP.
Income Tax Credit For First Time Home Buyers
Since January 27, 2009, first time home buyers are eligible to claim an amount of up to $5,000. This amount can translate into tax savings of up to $750.00. It is designed to provide some tax relief for first time home buyers with respect to the closing costs related to buying a home such as legal fees and expenses.