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What is a Home Buyers’ Plan?

The plight of the retired worker in this regard is quite pitiful, as he has to fulfill his dream of buying a quality house with a shoe string budget, while often subjected to various formalities and procedures on the way, owing to one’s personal and health conditions, also considering other monetary factors such as repayment capacity. It is under these circumstances that the Canadian government has started the Home Buyers’ Plan (HBP) under the purview of the Registered Retirement Savings Plan (RRSP).

Let us first look into the Registered Retirement Savings Plan (RRSP). The RRSP is a retirement plan that enables the retired employee or the spouse of the same to register, establish and contribute to. A contribution is the amount you pay, in cash or kind, while opening an RRSP plan and at anytime while contributing towards it. Certain contributions are deductible, and can be used as a means to reduce taxes. As long as there are funds in the plan, any investment made into the Registered Retirement Savings Plan (RRSP) is exempted from tax. Only while receiving payments from the said plan do you require paying the associated taxes. There is also a limit to the amount you can deduct from your RRSP plan, which is partly based on the previous year income of your Registered Retirement Savings Plan (RRSP).

Under the above mentioned plan comes the Home Buyers’ Plan (HBP). The Home Buyers’ Plan allows every individual with an RRSP account to avail 20,000 Canadian dollars to build or make a purchase of a home, qualified as per norms. The Canadian Revenue Agency (CRA) delivers the minutes of this plan. In order to qualify for the above plan, a person must be a first time home buyer. Additionally, the person can also be a former house owner, but on the condition that he/she must not have occupied the premise at least four years previous to the date if maturity of the plan and withdrawal of funds for building of the home. Disabled or challenged persons who are in need of a more accessible and comfortable home are also eligible. The third category for eligibility for the Home Buyers’ Plan (HBP) provides space for persons acquiring a better place of living for disabled persons who are related to them- which include relations through blood, adoption or marriage.

Also, the home must qualify certain set guidelines as enlisted below. The home registered under the Home Buyers’ Plan (HBP) must be located within Canada. The acquisition or building of the house must be complete within the 1st of October during the year in which the Registered Retirement Savings Plan (RRSP) withdrawal has been made. The purchaser must reside at the said property permanently within one year from the date of purchase of the home. The repayment period sets in exactly two years from the withdrawal of the funds. A maximum time cap of 15 years has been set for complete repayment of the withdrawn amount to build the home under the Home Buyers’ Plan (HBP), wherein 1/15th of the amount is repaid each year.

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