- First-time buyers account for 45% of home purchases
- Most are between 25 and 34 years old
- Their average purchase price is about $308,000
- Their average down payment is $67,000 (21% equity)
August 14, 2015
RRSP Home Buyer's Withdrawal Proposed to Increase
The current Federal Government (and I say current as they may or may not be the government in about 2 months as we're currently in an election campaign) has proposed increasing the current limit on how much a person can withdraw out of their RRSP (Registered Retirement Savings Plan) under the Home Buyer's Withdrawal Plan. They have proposed increasing it from 25K to 35K. I personally think this is a great idea and every little bit counts. As a reminder, under the HBW Plan you can take out without any tax implications as long as you pay back within a 15 year period. Note: you're also given a 2 year grace period before having to start repaying to your RRSP. This allows one to get used to their new mortgage payment plus property taxes & condo fees for strata properties.
See the full article by Canadian Mortgage Trends for full details as well as some other interesting stats:
First-time buyers with $35,000 in RRSPs may soon find it easier to buy a home. The Conservatives are proposing to increase the maximum RRSP Home Buyers Plan (HBP) withdrawal.
Today, I am announcing a re-elected Harper Government will raise this limit once again from $25,000 to $35,000, said Prime Minister Harper today. With this increase, we will continue to help families know the pride and stability of having a place to call their own.
Access to another $10,000 of down payment would let an otherwise qualified borrower purchase a home at a $200,000 higher price point, given the minimum required 5% down payment. Of course, one would still need to prove he/she can afford that much more, by meeting income, debt ratio and credit score requirements, etc.
It would be only the second hike in the limit since the HBP launched in 1992. Since then, home prices have soared 205%, but the HBP maximum has only been raised 25%.
According to CAAMP data:
Just a fraction of first-timers will benefit from this change, as the average RRSP contribution is only about $3,500 a year, and only 10% of FTBs use RRSPs to pad their down payment.
Home buyers who do take advantage of this measure and put down another $10,000 on their mortgage, would save over $1,000 of interest over five years at current rates. The trade-off, of course, is lost tax-deferred investment growth, among other risks.