Brampton is called by different names - "The Flower City." "The Heartland of Canada," "The City of Festivals," and also "The City Where You’ll Pay Top Dollar for a Home." Yes, you heard that right! Even the usually more budget-friendly condos come with a high price tag in Brampton. As of July 2024, the average price of condos for sale in Brampton was above $500K, standing at $515.52K.

This means that to buy a condo in this city, you must pool up a down payment of at least $25,000. Quite a big pile of cash to save up, right?

However, as a would-be homebuyer, you don’t have to worry about saving this large down payment if you have a Registered Retirement Savings Account (RRSP). Under the Home Buyer’s Plan (HBP), you can withdraw up to $60,000 from your RRSP to buy or build a qualifying home.

Tapping Into Your RRSP via the Home Buyer's Plan to Buy a Condo

The Home Buyer’s Plan (HBP) was introduced by the Canadian government in 1992 as a way to help first-time homebuyers access their retirement savings to buy a home. The best part about the HBP is that it allows you to withdraw money from your RRSP tax-free. This makes it an amazing way to get a little extra financial boost when buying a condo for sale in Brampton without the usual tax penalties.

WITHDRAWAL AMOUNT -

As of 2024, the maximum withdrawal amount under the HBP is $60,000 per person. That’s a huge increase from the previous limit of $35,000. If you’re buying the home in Brampton with your spouse or a common-law partner, the two of you can each withdraw $60,000, giving you a total of $120,000.

ELIGIBILITY REQUIREMENTS -

To take advantage of the HBP to buy a condo, you’ll need to meet a few eligibility requirements -

  • You must be a first-time homebuyer which generally means you haven’t owned a home in the last four years.

  • You need to have funds in your RRSP and the funds must have been in the RRSP at least 90 days before withdrawal.

  • You must have a written agreement to build or buy a qualifying condo for sale in Brampton.

  • You must intend to stay in the condo as your principal residence within one year of buying or building it.

  • You must be a resident of Canada when you withdraw the funds from your RRSP within 15 years, starting two years after the withdrawal.

HOW TO WITHDRAW FUNDS USING THE HBP

Here’s how you can withdraw RRSP via the Home Buyer’s Plan to buy a condo in Brampton -

  1. Plan Your Withdrawal Amount

Decide how much you want to withdraw from your RRSP to buy the condo. The maximum amount you can withdraw is $60,000 but you can withdraw less if needed.

  1. Complete Form T1036

To initiate the withdrawal, you need to fill out Form T1036 which is the “Home Buyer’s Plan Request to Withdraw Funds from an RRSP.” Get this form from the Canada Revenue Agency (CRA) website, fill out Part 1 and submit it to your RRSP provider.

  1. Submit the Form to Your RRSP Provider

Once you have completed Part 1 of the form, send it to the financial institution that manages your RRSP. The authorities will complete Part 2 and process your withdrawal request for buying the condo for sale in Brampton. Make sure to keep a copy of the completed T1036 form for your records.

  1. Receive Your Funds

After your RRSP provider processes the request, the funds will be released to you. This usually happens within a few days and you can use the money to help with your down payment or other home-buying expenses.

  1. Use the Funds for Your Home

Now that you have the funds, you can go ahead and put them towards your new condo in Brampton. Whether you plan to use these funds for the down payment, closing costs, or any other related expenses, this money will make your home-buying journey smoother.

  1. Remember to Repay the Amount

One important thing you must remember about the HBP is that it’s not free money. You’ll have to repay the amount you withdraw within 15 years.

The first payment will be due two years after you make your withdrawal and buy the condo for sale in Brampton. Each year, you’ll need to repay at least 1/15th of the total amount but you can pay more if you want to get it out of your way sooner. Keep in mind that if you don’t repay the maximum amount in any given year that amount will be added to your income and taxed.

Benefits and Risks of Using Your RRSP for a Brampton Condo

  • Pros

  1. One of the biggest perks is that you can withdraw up to $60,000 from your RRSP tax-free under the Home Buyer’s Plan. If you’re buying with a partner, that doubles to $1,20,000. This extra cash can top up your down payment amount, helping you afford a better condo or lower your mortgage amount.

  2. Usually, when you take money out of your RRSP, you have to pay taxes on it. But with the HBP, you don’t pay any taxes on the amount you withdraw, as long as you follow the repayment rules.

  3. A larger down payment on the condo can reduce or even eliminate the need for mortgage insurance which could save you money over time.

  • Cons

  1. The money you withdraw from the RRSP to buy the condo for sale in Brampton is basically like a loan. You have to start repaying it back into your RRSP within two years and you’ll need to repay the full amount within 15 years.

  2. Taking money out of your RRSP means you’re reducing your retirement savings. Sure, you’ll be investing the money in a home which is great but you will also be sacrificing your retirement days fund which could impact your finances in the future.

  3. The money you withdraw from your RRSP won’t be earning interest or growing until you pay it back. Over time, this could mean you’re missing out on the power of compound growth which is key to building your retirement nest egg.

Key Takeaway - Take Money Out of Your RRSP Only If You Have Enough Saved for Retirement

Your retirement funds are there to support you in your golden years and withdrawing too much too soon could leave you short on money later on. So go for the Home Buyer’s Plan only if you have enough saved and withdrawing $60,000 won’t impact your golden years. If this is not the case, you can go for other ways to fund your home purchase too.

For example, you might consider saving for the down payment for buying the condo for sale in Brampton in a high-interest savings account or a tax-free savings account (TFSA). Both options can help you grow your savings while keeping your RRSP intact for retirement. Another option is to look into various mortgage programs and grants available for first-time homebuyers.

In summary, think carefully before using your RRSP to buy a condo. Your future self will thank you for keeping that nest egg intact and exploring other methods to achieve your homeownership dream!