Canada’s home buyers’ plan is an excellent program for each and every first time homebuyer. It allows individuals to get into a home of their own and put their money towards an asset they own rather than pay someone else’s mortgage sooner rather than later. It is a very beneficial program that has stood the test of time, being in existence for approximately 17 years. With more than 900,000 homes bought using the Home Buyers’ Plan, it has more than met its goals.
The home buyer’s plan allows you to withdraw up to a maximum of $25,000 from your RRSP or Registered Retirement Savings Plans in order to use the money as a down payment on your first home. For many people, this means the difference between getting a home or waiting several more years in order to save up for such an investment. Getting in your home years earlier means you have more time to pay down your mortgage. This plan, which has been around since 1992, has been tweaked and adjusted throughout its existence, as recently as early 2009. This ensures that the plan meets the needs of the Canadian first-time homebuyers it was meant to help.
Unlike many other changes such as lower down payments and lower interest rates, the nationwide Home Buyers’ Plan allows you to keep your debt load as low as possible. Its purpose is to prevent Canadians from being stuck in bad mortgages that they can ill-afford because they were given close to 100% financing. It is also to prevent you from owing far too much on your house. With the Home Buyers’ Plan you can have a home and be confident that your indebtedness is not overwhelming. The Canadian government cares about the stresses of its residents.
Using the RRSP as a basis for the Home Buyers Plan means that you have to first invest in RRSPs, then borrow against them for your home and finally repay the withdrawal over a 15 year period. This is incentive for you to save for your retirement. The tax benefits of putting money into RRSPs mean that you can save tax-free money for the purchase of your first home and then, continue building your retirement nest egg, all the while using tax-free dollars.
What the Canadian Home Buyers’ Plan amounts to is this. The mortgage you take out will be for a lower percentage of the cost of the home than you would probably be able to otherwise. You will also be able to have extra money for the myriad of other expenses like the mortgage broker’s fee, appraisal fees, survey costs and other incidentals that come with home buying. Using the Home Buyers’ Plan may also save you the fees associated with a high-ratio mortgage insurance premium. The plan also encourages you to save for retirement in an effective way at a much earlier age.