The present unstable economy of the entire world has influenced the global citizens to strive for better investment and saving plans and the Registered Retirement Saving Plans (RRSP) for the Canadian people is just a testimony of the same. If you are considering this as a mere investment plan then you just need to think twice. There is no denying to the fact that the plan offers an immediate return on investment by means of tax deduction but, keeping this fact aside, there is another advantageous aspect of RRSP investments and that is Home Buyer’s Plan (HBP).
What is the Home Buyers' Plan?
It’s pretty much common for a young investor to skip thinking about retirement because he/she is quite caught into the present and hardly bother to dwell in the future. But the Home Buyer’s Plan (HBP) could be a great companion at the old days. The program actually allows the investors to withdraw an amount up to $25,000 in a calendar year from the RRSP investments in order to buy or build a qualifying home for him/herself or for a related person with a disability. The amount is quite sufficient to make the down payment towards the purchase. But there are some eligibility criteria to take part in this plan that the applicants must successfully fulfill.
HBP eligibility conditions
· The applicant must be considered as a first-time home buyer.
· The applicant must maintain a written agreement to buy or build a qualifying home for himself or for the person with disability who the applicant is buying or building the qualified home for.
· In instances where the applicant is withdrawing funds from the RRSPs to help a related person with disability to buy or build a qualified home, the related person must be agreed to such agreement.
· It is must for the applicant to intend to live in the qualifying home as the principal place of residence within a year of buying or building the home. If he has bought or built the qualifying home to help a related person with disability, he must intend that the related person with disability lives in the home as his/her principal place of residence.
If the applicant has already participated in the Home buyer’s Plan previously then also he/she may be considered eligible again for the plan provided, the repayable HBP balance is ZERO as on the January 1 of the year of withdrawal and the applicant fulfill all the above furnished criteria.
Is it necessary to be a first-time home buyer?
Generally, the applicant has to be a first-time buyer in order to withdraw funds from the RRSPs for buying or building a qualified home. The applicant would be deemed as a first-time buyer if in the last four year period, he/she didn’t live in a home that is owned either by own or by the spouse or common-law partner.
How to calculate the four year period?
The four year period begins on the January 1 of the fourth year reverse to the year you withdraw the fund and ends 31 days prior to the day you intend to withdraw the fund. For example: if you withdraw funds on May 31, 2015, the four year period will begin on January 1, 2011 and will end on April 30, 2015.
When to start repaying the amount?
Generally, the applicant has up to 15 years of time to repay the RRSP amounts although; he/she can make the full payment to the RRSP at any point of time within this period.
The first repayment starts on the second year after the year the fund is withdrew from the RRSP for the HBP. However, if the applicant chooses to repay earlier, the payment period will remain the same but the payments made before the stated time will get reduced from the total amounts that he/she has to repay.
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