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Why the Home Buyers' Plan probably won't help you much

REUTERS/Mark Blinch

Thanks to the Home Buyers’ Plan (HBP), you can raid your retirement nest egg if you’re hoping to get a foot into the real estate market. 

But as new data from Zoocasa shows, it won’t get you far in some of Canada’s hottest markets.

First-time buyers can pull out a maximum of $35,000 from their Registered Retirement Savings Plan (RRSP) and $70,000 for couples, without the usual penalties.

To be eligible, you can’t have owned a home, or have lived in one owned by your spouse, in the four straight years before the house was bought. Exceptions can be made after breakups.

You also have to sign an agreement to buy or build a home and make it your principal residence within a year of purchase or completion.

All of the money taken out must be put back into an RRSP within 15 years after a one-year grace period.

The problem is, even the maximum of $35,000 will be enough for only 3.5 per cent of the average price of a home in Vancouver, and 4.3 per cent in Toronto. That’s not enough to cover the minimum five per cent down payment. 

(Zoocasa)

You’ll be in much better shape if you’re laying down roots in the Prairie Provinces, especially Saskatchewan. 

That $35,000 cheque will get you 13.5 per cent of a home in Regina and 12.2 per cent in Saskatoon.

How long it takes

The amount of time it takes to save up the maximum RRSP amount also depends on where you live. 

“It would take those looking to buy Ottawa real estate the least amount of time to save; due to the city’s strong public service and government sectors, median incomes are higher than in other major regions at $44,700, making it possible for savers to set aside a maximum of $8,046 annually,” said Penelope Graham, managing editor at Zoocasa, in the report. 

“In contrast, it would take the longest in Toronto, where the median income is comparably lower at $32,600, allowing for a maximum RRSP contribution of $5,868.”

Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.

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