Mortgage Wise: Your Down Payment

The RRSP Home Buyer's Plan Are you a first-time homebuyer? If so, take a look at the federal government's "RRSP Home Buyer's Plan." It allows first-time home buyers to withdraw up to $20,000 per person from their Registered Retirement Savings Plan (without tax liability) to buy a home in Canada.

Among the conditions of the Plan:

+ You have to enter into a written agreement to buy or build a

qualifying home. + The home must be your principal place of residence and includes

all types of homes (e.g., single-family homes, semi-detached

homes, townhouses, condominium units, or mobile homes). + Your RRSP contribution must be in your RRSP for at least 90 days

before you make a Home Buyer's Plan withdrawal. + You must withdraw funds within the same calendar year in one or more installments. For instance, if you withdraw funds over two years, you will be taxed on the funds withdrawn in the second year. In addition, you will lose contribution room in your RRSP. For

more information, contact the Canada Revenue Agency or check

the Web Site at www.cra-arc.gc.ca. + Of the borrowed funds, a minimum of l/15th must be repaid each year until the full amount is repaid to your RRSP. Basically you're borrowing a tax-free interest-free loan from yourself. However, bear in mind that you are not earning interest on the RRSP funds

used for your down payment. Your RRSP repayment period begins

in the second year after your initial funds withdrawal.

Before you cash in your RRSP to buy a home, weigh the pros and cons carefully. Is it worth it to give up the advantages of long-term compounding interest on your RRSPs to buy a home? Can you afford the RRSP payback requirement? If you can get a low mortgage rate and your investments are paying a relatively low rate of return financing your home with RRSPs may be a wise move.

Max Cafissi Broker/Owner

Home Quest Mortgage Centre 7905 Yonge St., Unit #7 Innisfil 705-436-7793