BMO Financial Tip of the Week: Use Your RRSP to Help Make the Down Payment on Your First Home
As part of
literacy and 'Making Money Make Sense' for Canadians, BMO is releasing
a financial tip every week in 2012.
BMO's Financial Tip of the Week: Use your RRSP to help make the down
payment on your first home
The down payment is a lump sum you are required to contribute to your
home's purchase price. Depending on the amount, a mortgage is
classified as either "conventional" (a down payment of 20 per cent or
more) or "high ratio" (a down payment of less than 20 per cent).
One way to come up with a bigger down payment is by using your RRSP
first-time homebuyer, you are eligible to make a withdrawal up to
may do the same, for a combined total of
You have up to 60 days, after the second year, following the
withdrawal from your RRSP to make your first repayment. If you repay
the total amount withdrawn within 15 years, there will be no tax
"If you are able to provide a bigger down payment, it's a significant
way of helping you pay less interest over the life of your mortgage.
Also, with a down payment of at least 20 per cent, you avoid paying
mortgage default insurance," said
Ms. Archdekin added that Canadians should be considering the benefits
of choosing a 25-year amortization as a way to decrease total interest
costs and to begin building home equity sooner.
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