How can you use your RRSP to help you buy your first home?

As many as 50% of first-time home buyers use their RRSP savings to help finance a down payment. The federal government's Home Buyers' Plan, permits using up to $25,000 in RRSP savings ($40,000 for a couple) to contribute towards a down payment on a first home. You will have to repay your RRSP account over a total of 20 years.

To qualify, the RRSP funds being used must be on deposit for at least 90 days. You'll also need a signed agreement to buy a qualifying home.

Even if you have already saved a down payment, it can make good financial sense to access your savings through the Home Buyers' Plan. For example, if you have saved $20,000 for a down payment - and assuming you still have enough "contribution room" in your RRSP for a contribution of that amount you could move your savings into a registered investment at least 90 days before your closing date. Then, simply withdraw the money through the Home Buyers' Plan.

The advantage? Your $20,000 RRSP contribution will count as a tax deduction this year. If you receive a tax refund you receive to repay the RRSP or other expenses related to buying your home.

While using your RRSP for a down payment may help you buy a home sooner, but it could result in you forgoing some tax-sheltered growth. Be sure to ask your financial planner whether this strategy makes sense for you, given your personal financial situation.