Most of you know that when I bought my townhouse almost 4 years ago, I utilized the First Time Home Buyer’s Plan (HBP) to help with my down payment. For those unfamiliar with the HBP, it allows you to use up to $25,000 of your RRSPs towards the purchase of your first home – tax free!
This was a strategy I always knew I was going to use, so anything that was earmarked for my down payment, I threw into my RRSPs. Then, I would reinvest my tax refund back into my RRSPs for an even bigger gain. I also saved about $20,000 outside of my RRSPs, since the maximum you can take out is $25,000.
Related: How I saved for my down payment
You have up to 15 years to pay back the amount you’ve withdrawn, so for each year of your repayment period, you have to repay 1/15 of the total amount. So for example, I took out $25,000. My repayment every year is $1,666.67 ($25,000 / 15). Each year, you’ll get a Home Buyers’ Plan Statement of Account with your notice of assessment, which will include all the information you need – total HBP withdrawals, the amount you’ve repaid to date, your balance for the HBP, and the amount you have contributed to your RRSPs and designate as a repayment for the following years.
How to pay the HBP back
I use TurboTax every year to do my taxes, and it’s really straight-forward in how to pay it back.
Just enter in all of your information, and TurboTax will do the rest for you. Honestly, it really took all the stress away from paying back the HBP, because at first, it seemed really confusing. Most online tax software is set up to handle HBP repayments in a user-friendly way. :)
When you have to start repaying
Your first repayment starts the second year following the year you made the withdrawal.
You’re allowed to start making repayments earlier, but your years of repayment (15) will remain the same. Any repayments you make before your first repayment is required will reduce the amount you have to pay for the first year. That is, unless your early repayments are more than the minimum required payments for the first year, then the difference will reduce your HBP balance (and the remaining repayment amounts) over the 15 year repayment period.
Paying more or less than the minimum payment
If you want to pay more than the 1/15 required in any given year, you’ll still have to make your payments the next year, it’s just that the HBP in later years will be reduced.
However, if you want to pay LESS than the minimum required payment, the government will treat the amount you withdrew from your RRSP as income for that year. You’ll be taxed on it, and it won’t be pretty.
Important! You can’t withdraw any money from your RRSP that was contributed within the last 90 days. Consider the timing if you plan on utilizing the HBP for your first home.
What I love about the Home Buyers’ Plan is that you can use it for whatever you want. I used the entire amount for the down payment on my home, but you could use it for renovations, closing costs, or buying essentials for your home. It’s flexible, and that’s what makes it a good tool for first time home buyers.
Did you use, or are you considering using, the Home Buyers’ Plan for your first home?
Note: this post is sponsored by TurboTax Canada, but was written and edited by me.
I’m currently in Toronto scouting out venues for #CPFC15 (yes, it’s actually happening!!!). For those that don’t know, CPFC stands for the Canadian Personal Finance Conference, and it’s something that I co-founded with my pal Preet Banerjee back in 2011. We wanted to create an event for personal finance bloggers to get together, learn, and share ideas, and the 2012 and 2013 conferences both sold out extremely fast. Past presenters have included Rob Carrick, Dan Bortolotti, Ellen Roseman, Bruce Sellery, and Kerry Taylor. It’s the only conference of its kind in Canada, and I’m super proud to be part of it.
Preet stepped away from the event after 2013, and after a year hiatus, we are back on track and ready to make 2015 the best PF conference ever. :)
If you’ve attended before, or are interested in learning more, I’d love to get your opinion on a few ideas I have for the conference. It’d be really helpful if you could take a few minutes and fill out this survey for me!
To stay up-to-date on the latest #CPFC15 news, you can follow the hashtag on Twitter, and like our Facebook page.
Any questions? Leave a comment, I’d be happy to answer them all.
Happy New Year! I hope that you all had a great holiday season. :) I’m coming off of a horrible battle with food poisoning, and I still don’t feel very good. But I’m happy to be getting back into some sort of routine.
2014 was an interesting year. Lots of ups and downs. I lost my job, but gained a new one. Lost touch with some friends, but gained new ones. I became vegetarian (after a year of pescetarian), started training for a marathon, and then got injured. Twice. I did a bit of traveling (but not enough – it’s never enough), started reading a lot more, and worked really hard on building relationships, bettering my headspace, and making myself more available – which meant less time working in front of my computer.
2015 will be about finding balance, and living with less. Right now, I don’t have much balance. I live most of the time at BF’s house, and as a result, my own house gets neglected. Stuff has piled up everywhere – stuff I don’t even need. Whenever I’m home, it’s a mad rush to get laundry done, go grocery shopping, and work on freelance stuff. Tasks get pushed aside, things get misplaced, lunches don’t get made, and sometimes it just gets too chaotic for me.
So I really want to focus on three things:
- Planning out each week as best I can.
- Start donating/selling/throwing away things I no longer use.
- Re-focus on saving on the little things.
Retirement has always been important to me, and 2015 is no different. It will continue to be a main priority, and hopefully if those 3 goals above work out, I’ll be able to throw more money towards my retirement than I have been in past years.
Here is a breakdown of what I hope to achieve in 2015:
- Stay debt-free (aside from my mortgage). I feel like this goal is an obvious one, but it needs to be said.
- Increase my income by 15%. Last year my goal was to increase my income by 20%. But because I lost my job, I wasn’t able to achieve this goal. So I’m bringing it back for this year. I’d like to increase my overall income (full-time and part-time) by 15%. I think that this a bit of a stretch, but it’s still realistic.
- Save at least $800/month into my RRSP/TFSA. This is an increase of $50/month from last year. My RRSPs are in TD e-series funds, and my TFSAs are with Questrade. I’ll likely split up the money $600 into RRSP and $200 into TFSA. For those of you curious, I use a modified Global Couch Potato investment plan.
- Stay on budget every month. I need to make realistic budgets for myself this year, and focus on hitting those targets. That’s the only way I’m going to be able to achieve the rest of my financial goals this year.
- Limit Starbucks trips to 2x/month. No need to explain. :)
- Bring lunch to work most days. My co-worker and I like to eat at a food truck most Fridays, and now that our department is expanding, I expect that we’ll want to do some team bonding. I want to bring my lunch to work most days, but I also don’t want to miss out on the small things.
- Shop for needs. I didn’t do a lot of shopping last year, but I did enough to make me feel like I need to make this a goal. I need to be more aware of what I actually need, instead of what I want.
- Go on one big trip. We’ve been talking about taking an RV trip up to Alaska/Yukon/NWT sometime this year. It would be a much cheaper trip than going overseas like we had originally planned. I’ve been up to Alaska on a cruise before, but driving seems way cooler. Plus, it works out because there are a couple of other trips that I’ll take this year as well – like two trips to Toronto, one to San Francisco, and then in November I’ll likely be headed to Mexico for a week. Plus there’ll be a small trip to Seattle (Blue Jays game!), and fingers crossed, Portland as well.
- Run in one half marathon. 2014 was an awful year for me. I got injured twice, and was forced to stop running in August. My goal last year was to run in 4 half marathon races, and I only completed one. This year, my goal is to just train for one. And since I learned my body can’t handle both field hockey and running at the same time, I’ll have to do all my training during the summer. This is provided my orthotics
- Read 20 books. I have a huge list of books to read on GoodReads. Time to tackle them.
- Enroll in Business Management program. I did a lot of research last year to figure out exactly how I’m going to take my career to the next level, and I came up with a part-time diploma program that I believe will help a lot. My one and only professional goal for 2015 is to enroll and start taking classes.