RRSP HBP is a voluntary contribution plan for retirees created in 1957 that provides Canadian workers their own special funding program.
It is an investment every eligible working Canadian can apply to and enjoy later on upon their retirement. Similar to any type of contribution scheme or pension plan, RRSP earns interest allowing depositors’ money to earn over a period of time.
What is This All About?
We prepared a brief primer about RRSP contributions and what to expect from this retirement plan to assist you in deciding should you get one today.
Our approach is to guide you in deciding whether RRSP is a worthwhile investment or not and how this plan will assist you years after you retire.
Moreover, having an RRSP account provides you means on how to rebuild your credit score through carefully planned credit payments as advised by your financial advisor.
The following are the top 5 contribution facts surrounding RRSP Home Buyers Plan:
RRSP Fact 1: RRSP Home Buyers Plan Accompanies Steep Withdrawal Penalties
Withdrawal penalties surround RRSP and can cost you your hard-earned money because they are subject to withholding tax.
The rates are as follows: 10% tax for withdrawals up to $5,000.00, 20% tax for withdrawals between $5,001.00 and $15,000.00, and 30% tax for withdrawals more than $15000.00, respectively.
However, for first-time homebuyers, an RRSP Home Buyers Plan (HBP) is an exception to this rule.
With HBP, you can withdraw up to $35,000.00 tax-free from your RRSP that can be used as your first installment on your home purchase. Owning your home is easily achievable right now through HBP.
(NOTE: If you have participated in HBP before then you are still eligible to qualify again provided you have no current balance in your HBP account.)
RRSP Fact 2: Implementation of a 90-day Withdrawal Rule is Mandatory
Before you decide to withdraw from your RRSP account, your funds must remain untouched for at least 90 days to avoid penalty.
However, if funds are withdrawn within the 90 days period then withholding tax is not deductible for that current year.
If you are expecting money from other sources then postpone depositing them into your RRSP account for tax exemption purposes because your deposit is rendered “on hold” automatically and not accessible until the 90-day ruling is satisfied.
(NOTE: You can easily relieve yourself from bad credit standing by taking advantage of RRSP by sourcing funds from this to repair your own credit. This can improve your negative record dramatically through planned repayments using your RRSP contributions.)
RRSP Fact 3: RRSP Multiple Withdrawals Allowed
Withdrawal from your funds is tax free by providing the T1036 form as part of the Home Buyers Plan.
Once your T1036 form is ready, you can immediately submit this to each issuer of your RRSP to expedite your withdrawal request.
You are allowed, however, to withdraw from multiple RRSP contributions. You only need to be the owner of these accounts to make this happen.
You have to clearly remember that withdrawal of funds is allowed strictly from accounts that you only own. For example, a contributor (account holder A) cannot withdraw from his/her spousal account (account holder B) because the latter is in the former’s spousal name.
However, if both the account holder and his/her spouse qualify as first-time home buyers instead then they can withdraw from their respective funds a maximum of $35,000.00 each.
RRSP Fact 4: Implementation of a 30-day Time Limit is Set
You are no longer eligible for HBP and your withdrawn funds are subject to a penalty if you use this beyond 30 days from contract closing or taking ownership of your purchased property.
We suggest that you submit your application for RRSP at the earliest to prevent ineligibility to the investment plan.
RRSP Fact 5: RRSP HBP Repayment is Always Due and Demandable
The HBP is a program and incontestably your personal loan. You are required by law to pay back what you have borrowed for a certain number of years.
After completing your withdrawal transaction, your initial payment is no later than 2 years. You are given 15 years to repay the full amount through regular payments.
The Canadian Revenue Agency (CRA) will provide you with an HBP account history reflecting the amount you have to settle that is computed from your investment’s remaining funds.
You are likewise obligated to repay one-fifth of the total amount you borrowed until this is fully paid and posted on your RRSP account statement.
(NOTE: If you have enough funds and are able to repay the full amount borrowed from your RRSP at any time then your penalty is waived for making early payments.)
Home Loan with Bad Credit History is No Good
Your eagerness to use RRSP HBD for purchasing your house is a wise choice. However, depending on this investment alone is not a guarantee for a successful house purchase.
You need to do your own credit checks, as well. Banks and lending institutions are “credit sensitive” when it comes to bad credit records. Hence, you have to make sure that your credit rating is just as good as your RRSP account.
Your credit history carries a huge impact in all of your financial dealings most especially when applying for a home loan.
Having a negative credit score will gravely affect your financial make-up and if you are contemplating on acquiring a home loan with bad credit history then you are making it more difficult for lenders to grant your request.
Bank on a Trusted Mortgaging Specialist
We are specialists in mortgaging and in credit score restructuring for 9 years running. Our office is located in Canada and we offer financial advice as well as mortgage services.
Please feel free to contact us at +1 647-373-9651 or drop us an email at [email protected].
We are more than glad to assist you in making your house purchase your dream come true.
Final Word on RRPS HBD
RRSP Home Buyers Plan acquisition is a financial blessing only a few can afford.
Bearing this in mind, you have to monitor your finances carefully so that your credit standing will not be a stumbling block to your future house purchase.
Take note of the top 5 RRSP HBD investment facts presented so that you can proceed in acquiring this plan confidently.