Thursday, February 12, 2009

For the Home buyers

Has everyone else seen the ads promoting Canada’s Economic Action plan? Through those ads I learnt a couple more things about Budget 2009, which will affect me as a potential first time home buyer this year. A couple of good things.

First-time home buyer’s tax credit: “non-refundable tax credit based on an amount of $5,000 for first-time home buyers who acquire a qualifying home after January 27, 2009 (i.e. the closing is after that date).” You are a first time home buyer if neither you/your spouse owned a home in the last four years.

Home Buyer’s Plan: The amount allowing first time homebuyers to withdraw from RRSP to buy a home has increased $5000 to $25,000. Now there is debate on whether it is a good idea to withdraw from your RRSPs to buy a home. Because you will have to pay it back in installments over a maximum period of 15 years. This will add on top of your mortgage payments. At the same time you still want to be doing regular RRSP contributions as well. It’s a lot of payments all together.

Not that I have $25,000 in RRSPs, but in my case I will withdraw as much as I can through the HBP. It’s all about planning and budgeting. As long as I am aware of all the demands on my budget and plan accordingly, why shouldn’t I be able to meet those obligations? For example, how about figuring out what I have to put aside monthly to pay back HBP and save for RRSP contributions, and put that together with monthly mortgage payments and other expenses when I’m trying to figure out what I can afford to buy? The whole point is to remember that it’s not $25,000 of free money.

Also, likely I will only be using HBP for this first home purchase. I grew up learning from my parents that owning real estate is always a good thing. I don’t believe that once I can make this first purchase I plan to not own a home again for the 4 years in order to be eligible.