Down payment for home mortgages

Down payment for home mortgages

In 2014, Calgary mortgage broker Steven Crews, from Verico iMortgage Solutions, did a series of radio broadcasts about mortgages and mortgage financing for Shine FM. Have a listen and you’ll pick up some helpful tips…

If you are a first time home buyer, then why not take advantage of the only advantage that’s available to you. Many first time home buyers don’t realize that they can use the saving in their RRSP toward the down payment…

In fact, if you plan ahead you could get thousands of extra cash from the government using your RRSPs! This is what I talk about here:

The main advantage of being a first time home buyer is that you can withdraw up to $25,000 from your RRSP. This money can be used toward the purchase of your first home.

The minimum down payment to purchase a home is 5% of the purchase price. Saving that down payment is often the biggest hurdle for first-time home buyers. That’s why I suggest that you use your RRSP to save for your down payment.

For every dollar you deposit to your RRSP you will receive a tax rebate. The rebate could be anywhere from 25% to 40% depending on your tax rate. Also, monetary gifts can be deposited into your RRSP. A gift of $1,000 could end up being anywhere from $1,250 to $1,400 when you include your tax rebate. There are a couple of key rules to remember when you utilize your RSP to save the down payment:

  1. The money must remain in your RSP for a minimum of ninety days.
  2. You can withdraw under the home buyer plan up to 30 days after you take possession of your first home. Therefore, you can’t just deposit the money right before you purchase.
  3. Once you withdraw the money through the RSP home buyer plan, you have to pay it back over the next fifteen years.
    • Every year, you either contribute one fifteenth of your withdrawal toward your RRSP or you pay taxes on additional income for that tax year equal to the RRSP you didn’t make that year.
    • For example, A $15,000 Home Buyer Plan withdrawal means you must pay back $1,000 each tax year.
    • If you have to pay $1,000 back to your RRSP each year and 5 years from now you missed the contribution, then you would pay taxes on your annual income plus $1,000. The next year you can contribute again, or not.

It’s important to review all the rules when you take advantage of the CRA Home Buyers Plan, visit the government of Canada website for more info at or search for “cra home buyer plan” on google.

I also explain a client’s specific situation here and show how they utilized the CRA Home Buyer Plan to save an additional $9,000 when they purchased their first home.

Give your feedback. If you have a question, or topic that you would like to learn more about, let me know. If your question or topic is used on the ShineFM Mortgage Expert segment you will receive something special!

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