RRSP stands for Registered Retirement Saving Plan. There is a program introduced by the government to ease up the down payment plans for the first time home purchasers. It is an interest free as well as a tax free plan that enables you to get the most while paying your down payments on a mortgage.
RRSP Loans can assist you in making the full use of the savings you have for your retirement. It is a valuable topic and you need to be aware of how to use it, and not just opening it.
The primary function of RRSP loans is to avail the maximum benefit out of the RRSP Contributions. It enables you to fulfil the annual RRSP contribution amount that you are allowed to have. Or you could make use of the contributions that you haven’t used in the past.
RRSP Loan Down Payment
RRSP home buyers plan is a very helpful for a first time home buyer to come up with down payment. It enables you to withdraw money from the RRSP Account. The benefit of that is that a first time buyer would not be incurred with the tax penalties when withdrawing from RRSP Account.
However, there are certain criteria to be followed when withdrawing money from the RRSP Account:
✦ Only $25,000 can be withdrawn per person borrowing from RRSP
✦ The Contributions of the RRSP must have been present in that account for at a minimum of 90 days.
✦ The funds that are withdrawn from the RRSP have to be paid back within a period of 15 years at the most.
✦ If for some reason you could not pay the RRSP fund of the given year, you will not be exempted for taxes on that amount and that amount will need to be included in your income.
The following are the steps to carry out the RRSP Loan Procedure
► Pre Approve the Mortgage
Since every person has a different income plan, you would need to fill out a mortgage application to know about your band of price range.
►Consulting an Accountant for reviewing the RRSP Process
You would need to consult an accountant. An accountant would check out your numbers and let you know about how much tax refund you could receive after setting up the RRSP.
► RRSP Setup and Contribution
Now you can start the actual process for the RRSP application and loan. You would need to meet your financial planner for this.
This would enable you to have a good amount of money that could be used to cover the down payments on your mortgage. The amount that you receive from your RRSP can be deposited over a period of 15 years.
For detailed rules, you can visit the RRSP’s home page and also check out the plans available for you. The web link is: www.cra-arc.gc.ca.
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