How to Save For a Down Payment of a House in 3 Simple Steps
How to Save For a Down Payment of a House in 3 Simple Steps:
1. Set up an RSP account (Retirement Saving Account...contributions to your RSP reduce your taxable income).
2. Set up a regular automatic savings plan where a set amount from your chequing account is deposited into your RSP account each month and deposit any special monetary gifts you may receive into your RSP account.
3. Use money from your RSP account for your down payment!
Yes, it really is that simple. The Canadian Government has a Home Buyers' Plan (HBP) that lets a first time buyer withdraw up to $25,000 from their RSP account to purchase a home. The withdrawn amount must be repaid within 15 years, subject to a minimum annual repayment that is 1/15 of the amount withdrawn. If the full $25,000 is withdrawn, the minimum annual repayment is $1,333. If less than the minimum is repaid in any particular year, the balance is added to the taxpayer's income.
Using an RSP account to save for a down payment allows you to benefit from tax breaks while saving for your house. It is a win/win scenario. Setting up the automatic debit is critical. It is too easy to buy that new toy you want one month rather than paying into your RSP. If you are serious about buying a house you need to get serious about saving.
Not designing a savings plan and wanting to buy a home is the same as sitting in a coffee shop waiting to be discovered. It's not going to happen. You have to take the initiative and start saving now!
Lake Okanagan Realty