Well it is that time of the year again. RRSP contribution season. I had two calls today asking “I want to buy a new home but want to save for my retirement as well. I can’t do both as the downpayment would then be used for the RRSP contribution. What are my options?”
I am paraphrasing the two conversations I had but that was the gist of them. Both clients wanted to make the RRSP contribution, get the tax refund but still wanted to buy a new home.
Well…they, and you, can do both!!!
Each first time homebuyer is eligible to withdraw $25,000 each from their RRSP portfolio when buying a new home. However, after you make the contribution the amount must stay in the RRSP for 89 days. After that you can withdraw it and use it for the downpayment.
Yes, you have to pay back that amount to the RRSP – 1/15th each year.
89 days!!! Remember this number.
So go ahead and make that RRSP contribution for this year’s tax refund, start shopping for that new home! But remember to not complete on the deal for at least 89 days from the date of your contribution.
This is a win, win all around. You will even have some extra money from the refund for…new furniture, decorating, closing costs, etc.
Comments or suggestions for other posts are always welcome.