The RRSP deadline for this year falls on March 1st, 2021. If you’re planning on buying in the next year or two, now is the time to start strategizing!
What Do RRSPs Have to Do with Buying Home?
There are two main challenges for first-time homebuyers: First, coming up with a minimum 5% down payment on the purchase price can be tough. Second, not having established credit (or not having a good credit score) can act as a roadblock.
One of the solutions we can use to overcome these challenges is by leveraging your RRSP contribution limit room. The Homebuyers’ Plan is a Canadian program that allows new buyers to withdraw money from their RRSPs to put toward a down payment on a home. However, there are a few other benefits to contributing to your RRSP which we can use as an advantage come time for your purchase.
Three Ways to Use Your RRSP Contributions
The first way we can leverage your RRSP contribution room is by building up your RRSPs so that when the time comes to buy, you have room to borrow from them using the Home Buyers’ Plan. This is a slightly tricky manoeuvre that takes some skill, but one that has worked quite well for many of my clients.
Another advantage to topping up your RRSPs is the tax refund that you’ll receive. This refund is often significant, and it can be used in two ways: To build the remainder of your down payment, or to establish credit.
Make a Plan Before March!
If you’re interested in how you can use your RRSPs to purchase a home sooner, reach out so I can walk you through some of the RRSP strategies that have helped my clients in the past. But make sure to get in touch soon because the deadline is fast approaching!