What first-time homebuyers need to know about using RRSPs to fund a down payment

First-time buyers can use up to $35,000 from one or multiple RRSP accounts after they fill out aTo qualify, the funds have to have been on the account for at least 90 days. The buyer must also make the withdrawal within 30 days of acquiring the home, and they must provide a signed agreement to either buy or build the dwelling in question.Article content

It’s also important to note that you will not qualify if your spouse already owns a home, or if you’re planning to move into a home with your spouse that they own. But even if you qualify, there’s a bit of a catch: the amount taken out of the RRSP account must be paid back within 15 years in order to remain non-taxable. Buyers can begin making these payments virtually any time, although the first payment is due two years after the withdrawal is made.Once buyers get into this agreement, they must make minimum payments equal to one-fifteenth of the amount they borrowed from their account.

Jamie Golombek, managing director of tax and estate planning with CIBC Private Wealth, told the Financial Post that one advantage of RRSPs beyond giving first-time buyers more savings options is the flexibility and relatively low penalty for missing a payment compared to other loans.Article content “It’s not detrimental to miss a year of payback,” Golombek said. “Certainly, we encourage people to pay it back as soon as possible because otherwise you’re losing the real benefit of the in the first place, which, of course, is the tax-free accumulation inside the plan.”

financialpost 'The bagholder' typically bought in near the peak, when people were hyping the asset and the price was high, and held it all the way through steep declines, losing a lot money in the process.

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