How much can be put down?
requirement of a down payment in Canada is at least 5% of the price of
the home. If your down payment is below 20% of the price of the home you
are required to obtain mortgage loan insurance coverage from the Canada
Mortgage and Housing Corporation (CMHC) or Genworth Canada. The amount
of this insurance is based on the size of the down payment, the smaller
the down payment, the higher the premium. This insurance is added onto
the mortgage itself and will be part of your payment, it is not required
to be paid upfront. If your down payment amount is 20% or more of the
purchase price of your home you will not require mortgage insurance and
you will save this cost.
What qualifies as a down payment?
down payment could come from your cash savings, investments, a gift, an
inheritance, or even your Registered Retirement Savings Plans (RRSPs) by
utilizing the Home Buyers' Plan (HBP).
Home Buyers' Plan at a glance:
The Home Buyers' Plan (HBP) is a federal government program designed to
make the purchase of a home more accessible by borrowing funds from your
RRSPs should you qualify as a first time homebuyer. Currently, you are
able withdraw up to $35,000 from your RRSPs to use as a down payment. If
you are buying a house with a partner or spouse and they are also
considered a first time home buyer, they can take up to $35,000 from
their RRSPs too for a potential combined total of $70,000.
A few things
- You must enter into a written agreement to buy or build a
- Have intentions to occupy the home as a
principal place of residence
- You must be considered a first time
home buyer or have had a break down of marriage or common-law
- On January 1 of the year of the HBP withdrawal, any
previous HBP balance must have been repaid
- The qualifying home
must be bought or built before October 1 of the year following the HBP
- Cannot have owned the qualifying home more than 30
days before a withdrawal is made
- You must be a resident of
Canada to qualify
- The funds must have been held in an RRSP for
at least 90 days before they can count as a HBP withdrawal
withdrawal is not taxable
- You must start repaying your RRSP in
the second year following the withdrawal, from there you have 15 years
to repay the full amount withdrawn and must pay at least 1/15 each year
or be subject to penalties by the CRA.
- You miss out on the
tax-deferred income that this money could have accumulated
Don’t have $35,000 in your RRSP but still want to take advantage of the Home Buyers’ Plan? A Motor City RRSP loan could help you—talk to your Financial Services Representative about it.