|How to leverage your RRSPs to buy your first home|
Are you in the market for your first home? Dreaming of a space you can call your own? If you are an eligible first time home-buyer, then contributing to your RRSP(s) before the March 1 deadline can help you increase the funds available for your home purchase.
The Home Buyers’ Plan (HBP) is a program that allows you to withdraw from your Registered Retirement Savings Plan (RRSP’s) in order to purchase or build your first home. In 2019 there was a change to the HBP in an attempt to provide first-time home buyers with greater access to their RRSP savings by increasing the withdrawal limit from $25,000 to $35,000.
How do I know if I qualify?
In order to qualify, at least one homeowner must be a first-time homebuyer, which is defined as the following:
- You are considered a first-time home buyer if;
- You have never owned a home before
- In the last 4 years, you did not occupy a home that you or your current spouse or common-law partner owned
- You have a written agreement to buy or build a home
- You are a resident of Canada
- You intend to occupy the qualifying home as your principal place of residence within one year after buying or building it
- You have gone through a breakdown of marriage or common-law partnership (even if the other first-time home buyer requirements are not met)
Buying my first home using The Home Buyers’ Plan (HBP)
Once you know you can take advantage of the HBP, and have topped up your RRSP(s) (if applicable), make an appointment with a mortgage professional to complete a financial health check to determine what you qualify for. This will make it easier for you to shop the market so you are able to look at real-estate listings within your budget.
Note * The down payment funds must be in your account for a minimum of 90 days for the withdrawal to qualify under the HBP.
Do I have to pay the government back?
You will have 15 years to repay the amount used from your RRSP(s), or you can pay in full at anytime during that period. Your repayment period starts on the second year after you first withdrew your RRSP(s) for the HBP. For example, if you withdrew $35,000 in 2020 to purchase your first home, you have until 2022 before your repayment schedule commences.
Each year, the Canada Revenue Agency (CRA) will send you an HBP statement with your notice of assessment in order for you to understand how much has been paid back to date, the amount you need to contribute to your RRSP(s) and your HBP balance.
Up or down-sizing? Get yourself mortgage ready for a move this Spring!
Moving homes can be triggered by a variety of things, but the most common reason is space…not enough, or perhaps a little too much.
At some point, the place you thought was your forever home may not meet your needs any longer. If you are growing your family, perhaps your current digs are bursting at the seams. If you are preparing for retirement or thinking about moving cities, a smaller place may be just what you have in mind.
Regardless of if you are moving up or scaling it down, here are a few things you want to consider:
- If you are thinking about making a move before the end of your mortgage term, keep in mind you will need to re-qualify under the current rates.
Moving before the end of your term means breaking your mortgage. Don’t fret, this just means you will pay a penalty. This amount is dependent on your current mortgage provider and the mortgage product/terms.
- Factor in realtor fees, closing and moving costs
- Realtor fees can be anywhere between 2.5% and 5% depending on where you live
- For closing costs and legal fees, we suggest you budget approx. 1.5% of the purchase price
- Moving costs and miscellaneous
- Put aside approx. $1,000 in moving costs
In addition, you want to think about setting up your utilities, perhaps upgrading appliances, lighting, a fresh coat of paint, or even new furniture. If you are upsizing then the size of your couch may be too small for your new living room! Same can be said if you are downsizing from a larger home to a condo.
Tips for selling your home this Spring
If you are in the market to sell your home this spring, there are a few things you will want to do in order to sell for top dollar.
- Storage Space
Every home-buyer is looking for extra storage space, and we all want to envision our things fitting perfectly into our next home. TIP: Before listing your home, remove non essential items from hall and bedroom closets, as well as kitchen and bathroom cupboards. Spend some time to neatly organize what’s left. This will give the illusion of more space and present well to potential buyers.
Next to the perfect location, a home with good lighting is everything. TIP: Spend some time cleaning your windows, taking down heavy drapes and update the light bulbs in your home to LED. Making your home bright and warm will leave a glowing impression and make it that much more sellable.
A fresh coat of paint can make your home feel fresh and remove wear and tear. TIP: Homebuyers today are looking for neutral spaces that they can easily move into. Spend a little bit of money and paint over dark or bright walls with a light grey or beige in order to maximize your homes show power.
Everyone loves to personalize their space, but this can be a detriment when selling your home as potential buyers have a harder time picturing themselves living there. TIP: Get rid of a third of your things, including family photos, memorabilia and personal keepsakes. Depending on your home, consider hiring a stager to showcase the best use of the rooms in your house.
The exterior of the home is the first impression you have to make potential homebuyers fall in love! TIP: Take the time to spruce up the front by repainting your door, replace the house numbers, add a few potted plants to flank the entryway, add a new welcome mat, or trim down the shrubbery. If weather permits, make sure the grass is cut, power wash the walkway and keep things