Down Payment Using RRSP

Ever think you could use your RRSP for contribute to your down payment? As a first time home buyer, it can be a challenge to provide a down payment for your dream home. The Metro Vancouver New Home Guide published this article about how you can use your RRSP for a down payment on your first home.

A down payment is a lump sum you are required to contribute to the home’s purchase price. It’s common to contribute a 20% down payment. This is classified as conventional. A high-ratio is a down payment of less than 20%, requiring default insurance.

Need a larger down payment? One way is by using your RRSP savings, under the federal’s Home Buyer’s Plan. As a first-time home-buyer, you may be eligible to make a tax-free withdrawal of up to $25,000. If your spouse is eligible as well, that will be a combined total of up to $50,000.

You are required to repay your Home Buyer’s Plan withdrawal into your RRSP within a period of no more than 15 years. The first minimum annual repayment deadline is 2 years and 60 months after the date of the withdrawal. Although, you are able to pay earlier than that first repayment deadline. The minimum annual repayment amount is 1/15 of your original Home Buyer’s Plan balance. If you repay at least the minimum each year, there will be no tax payable.

Laura Parsons, mortgage expert, BMO Bank of Montreal says, “If you are able to provide a bigger down payment, it’s a significant way of helping you pay less interest over the life of your mortgage. Also, with a down payment of at least 20 per cent, you avoid paying mortgage default insurance.”

“Parsons adds that Canadians should be considering the benefits of choosing a shorter amortization as a way to decrease total interest costs and to begin building home equity sooner.”


If you have any questions regarding the above, please give us a call at 604-588-4466 or email us at – we will be happy to help you!