Buying Your First Home in 2017? – 7 Steps to Maximize Your RRSP Down Payment
Are you thinking of buying your first home in 2017? If yes, contributing to your RRSP before the March 1 contribution deadline can help you increase your funds available for your purchase. Follow the 7 steps below so you can maximize your available funds to purchase your first home.
Step 1: Check to see if you fit all the Home Buyers’ Plan (HBP) requirements at www.cra-arc.gc.ca/hbp/. If you do continue to the next step.
Step 2: Consult with your Dominion Lending Centres Mortgage Broker to review your credit and plan ahead so you are mortgage ready. Your broker will help you figure out what you qualify for as well as help you navigate all the first-time home buyer programs such as the new BC Home Owners Mortgage and Equity Program.
Step 3: Contribute to your RRSP to top it up to $25,000 (check your contribution room to confirm the maximum you can contribute) for each buyer. Contribute to the highest income earners RRSP first to maximize your tax refund. If you don’t have the cash to contribute, then it may be beneficial to borrow funds to contribute to your RRSP but talk to your mortgage broker first to ensure your credit is in line to do so.
Step 4: Do your taxes as soon as possible so you can get your tax refund in your bank account.
Step 5: If you didn’t maximize your RRSP to $25,000 put your tax refund into your RRSP (highest income earner first) to help reduce your taxes next year.
Step 6: Now that your funds are in your accounts review your options with your mortgage broker and let your RRSP contributions stay in your account for 90 days for the withdrawal to qualify under the HBP.
Step 7: Begin searching for your first home. Be sure to plan the closing date to be after the minimum 90 days required for the funds to be in your RRSP and allow time for funds to transfer out of your account.
Important 2017 Dates:
March 1 – the 2016 RRSP Contribution Deadline
February 20 – the first day you can file your 2016 income taxes
May 1 – the deadline to file your taxes if you are not self-employed
April 30 – all income taxes must be paid to CRA by all tax payers
June 15 – the deadline to file if you are self-employed
Good to Knows about the Home Buyers’ Plan:
- Funds withdrawn from your RRSP before they have been in your account for 90 days are not eligible under the HBP and income tax will be withheld from the withdrawal
- You can use your RRSP withdrawal for anything from you down payment, paying off debts, moving costs and more as long as you’re in a contract to purchase your first home
- You must repay the withdrawal amount over 15 years starting the year following your withdrawal or pay tax on 1/15th of the amount withdrawn in tax years you do not pay it back.
Your Dominion Lending Centres Mortgage Professional will help you plan to buy your first home. It’s never too early to start your mortgage application. Contact us today to get started!
By: Kathleen Dediluke