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Buying your first home is so exciting! However, it can also feel somewhat daunting. This will more than likely be the biggest purchase of your life, so understanding your options and financial strategy is important. One of these strategic options is the use of the Home Buyers’ Plan or HBP.

What is the Home Buyers’ Plan?

The Home Buyers’ Plan allows first-time home buyers the opportunity to utilize up to $25,000 of their RRSP funds for their down payment, tax-free. These funds are considered borrowed from the RRSP, which means they must be paid back within 15 years. If there are two individuals purchasing a home together, they can each access the $25,000 of their RRSP savings, increasing the amount to $50,000.

Advantages

This program may be a great option if you’re looking to avoid paying default insurance premiums that come with putting 5% down on your mortgage instead of 20% or more. It can also be a tax strategy if you’re in a higher tax bracket.

For example, if you have the funds available for your down payment outside of your RRSP, it might make sense for you to still utilize the Home Buyers’ Plan, as your contribution towards your RRSP will count as a tax deduction for the year. Keep in mind that if you choose this option, you will still need to pay back the amount you withdrew from your RRSP over the next 15 years.

Things to Consider

It’s always important to weigh your options in order to make the best decision. Some things to consider when deciding whether or not to use the HBP are:

- How will this affect my investment portfolio and my return on investment?
- Does it make sense to forgo future tax-sheltered growth? Do the savings now outweigh the compounding growth that occurs with having my money invested for longer?
- Will I be capable of repaying the required yearly amount back to my RRSP?

There are many things to consider when financing your home purchase and your for which programs you can take advantage of. But, like with anything, there is also a multitude of great resources available to you to complete your research. Don’t hesitate to with any questions you may have along the way!