Home Buyer's Plan and Common Law - be careful!

[chococrazy]

:mad: Wow. I just learned that I can't actually take money out of my RSP through the Home Buyer's Plan.

I have been living with my fiance for close to two years. We plan on buying a house before we get married. We are currently living in his condo, which he owns.

I am -not- eligible to withdraw from the Home Buyer's Plan!

From the CRA site (http://www.cra-arc.gc.ca/E/pub/tg/rc4135/rc4135-e.html):

Are you considered a first-time home buyer?

Question 1 - Did you, at any time during the period beginning January 1 of the fourth year before the year of the withdrawal and ending 31 days before the withdrawal, own a home that you occupied as your principal place of residence?

- Yes You are not considered a first-time home buyer.
- No Go to question 2.

Question 2 - Do you have a spouse or common-law partner?
- Yes Go to question 3.
- No You are considered a first-time home buyer.

Question 3 - Did your spouse or common-law partner have an owner-occupied home, at any time during the period beginning January 1 of the fourth year before the year of the withdrawal and ending 31 days before the withdrawal, that you occupied with that individual while you were living together as spouses or common-law partners?
- Yes You are not considered a first-time home buyer.
- No You are considered a first-time home buyer.

There goes $20,000 of our downpayment :cry:

So... if we had bought a house together before owning, we would be able to each use $20,000. I don't understand why it makes a difference that he bought a condo five years ago, and now we want to buy a house? They're penalizing me because of my choice to live with him before committing to purchasing a home with him?:mad:

This is really bumming me out.

[charliebrown]

:mad: Wow. I just learned that I can't actually take money out of my RSP through the Home Buyer's Plan.

I have been living with my fiance for close to two years. We plan on buying a house before we get married. We are currently living in his condo, which he owns.

I am -not- eligible to withdraw from the Home Buyer's Plan!

From the CRA site (http://www.cra-arc.gc.ca/E/pub/tg/rc4135/rc4135-e.html):

Are you considered a first-time home buyer?

Question 1 - Did you, at any time during the period beginning January 1 of the fourth year before the year of the withdrawal and ending 31 days before the withdrawal, own a home that you occupied as your principal place of residence?

- Yes You are not considered a first-time home buyer.
- No Go to question 2.

Question 2 - Do you have a spouse or common-law partner?
- Yes Go to question 3.
- No You are considered a first-time home buyer.

Question 3 - Did your spouse or common-law partner have an owner-occupied home, at any time during the period beginning January 1 of the fourth year before the year of the withdrawal and ending 31 days before the withdrawal, that you occupied with that individual while you were living together as spouses or common-law partners?
- Yes You are not considered a first-time home buyer.
- No You are considered a first-time home buyer.

There goes $20,000 of our downpayment :cry:

So... if we had bought a house together before owning, we would be able to each use $20,000. I don't understand why it makes a difference that he bought a condo five years ago, and now we want to buy a house? They're penalizing me because of my choice to live with him before committing to purchasing a home with him?:mad:

This is really bumming me out.

HBP is typically meant for first time buyers ... my wife lost out on her HBP coz she's a part owner of the family house

I think there's some sort of exemption for the first time buyer clause if u can prove that you didnt own a home in the last 7 yrs?

And as with all tax related filings, it's self-regulated subject to CRA audit.

[controlyar]

Choco,

This is quite obvious. Your partner is still a home owner! So, ofcourse you would not be allowed to take advantage of the HBP. And because you are common-law, you fall into this bracket also. It is unfortunate, but what can you do? Perhaps finding a new partner? :lol:

I guess you could avoid this by stating you are not common-law and purchase the home in your name and later add your soon to be husband. Thus, you would still be able to use that $20,000.

Look on the bright side. You have $20,000 already for your retirement and will not lose out on the tax deferred compounding growth of that $20,000. I have reviewed cases where the HBP will actually hurt the client.

Good luck with the new home.

[chococrazy]

Choco,

This is quite obvious. Your partner is still a home owner! So, ofcourse you would not be allowed to take advantage of the HBP. And because you are common-law, you fall into this bracket also. It is unfortunate, but what can you do? Perhaps finding a new partner? :lol:

I guess you could avoid this by stating you are not common-law and purchase the home in your name and later add your soon to be husband. Thus, you would still be able to use that $20,000.

Look on the bright side. You have $20,000 already for your retirement and will not lose out on the tax deferred compounding growth of that $20,000. I have reviewed cases where the HBP will actually hurt the client.

Good luck with the new home.

But if I hadn't moved in with him(or moved in less than a year ago), I would have been able to withdraw the $20,000 tax free. Being common-law, I don't have any property rights to his place. Why should I be 'penalized' for his purchase of his home? A couple buying for the first time is eligible to withdraw $40,000. This just makes no sense to me.

Of course there's a bright side that I'm lucky enough to have been able to have a substantial amount in RSPs. It still means that my downpayment is $20,000 less than I calculated.

That's it, coal for everyone this Christmas!!! :lol:

[CheapScotsman]

It works no different for married couples. Get married and your spouse owns a home, you are in the same boat.

Welcome to the secular world. The government long time ago decided that anybody who is living with somebody else is considered the same as married. The government had to do something to balance the playing field

The good side is … if you guys split up it is the same as divorce and you can get him in court

[anom]

The good side is … if you guys split up it is the same as divorce and you can get him in court

seems kinda funny cuz when you are in the relationship I don't think anyone sees that as a "good side".

[majesus]

The good side is … if you guys split up it is the same as divorce and you can get him in court
Good point, but I hate that...
Not going after Chococrazy. But to illustate an example, if they split up, she gets half the condo.

Obviously, that law is designed to help support a family situation where one partner works and gains the wealth and the other stays home and take cares of the family...
As well, there are arguements about getting Prenuptial agreements, being careful,etc.

But that law promotes freeloading, gold digging behavior and as well, always good to marrying someone richer then you. :lol:

Anyways, sorry for hi-jacking the thread. It was just a point that came up in my mind.

[chococrazy]

Good point, but I hate that...
Not going after Chococrazy. But to illustate an example, if they split up, she gets half the condo.

Obviously, that law is designed to help support a family situation where one partner works and gains the wealth and the other stays home and take cares of the family...
As well, there are arguements about getting Prenuptial agreements, being careful,etc.

But that law promotes freeloading, gold digging behavior and as well, always good to marrying someone richer then you. :lol:

Anyways, sorry for hi-jacking the thread. It was just a point that came up in my mind.

Not true. As common-law (I can only speak for Ontario), I have NO property rights to his condo.

As a common law spouse, if I was contributing to the equity of his condo AND wanted property rights, I would have to enter a cohabitation agreement outlining the details of my payments and agreement as to what to do if we split up.

Getting back to my original post, I've stopped freaking out... this will set us back some months but it's not anything we can't handle. It still sucks :lol:

[majesus]

I've stopped freaking out... this will set us back some months but it's not anything we can't handle. It still sucks :lol:

Sorry to hear that :(
I hope it all works out for yeah. :)

[AlexH]

Look on the bright side, you haven't been paying rent for these two years.

PS. http://www.nytimes.com/2006/12/17/fashion/weddings/17FIELDBOX.html?ex=1324011600&en=177d7653fb0b85d7&ei=5090&partner=rssuserland&emc=rss

[dealguy2]

How can the government prove you are a common law spouse anyway? If you've never filled joint returns then use the home buyer's plan. Since you're not married you can buy the home and have your "spouse" co-sign the mortgage.

[ullyeus]

That's interesting but does actually make sense. You've been leaving in a paidhouse and (concievably) both contributing to the household.

Not true. As common-law (I can only speak for Ontario), I have NO property rights to his condo.

As a common law spouse, if I was contributing to the equity of his condo AND wanted property rights, I would have to enter a cohabitation agreement outlining the details of my payments and agreement as to what to do if we split up.


http://www.ontariodivorces.com


it has been acknowledged that in cases where there has been a relationship of some length, a common law spouse may have some right to a share of the property not otherwise in their name.

[dolphie]

Being common-law, I don't have any property rights to his place.
that's where you're wrong....and that's i guess why the rule is the way it is.
Being common law, if you guys split up, he will have to buy you out of your share. same as when you're married.

[flito ray]

home buyer plan is a scam anyway. anyone taking advantage of it is not too bright., you better taking money out of your non rrps account first before using hbp. why would you give yourslef a 0% loan?????

[controlyar]

home buyer plan is a scam anyway. anyone taking advantage of it is not too bright., you better taking money out of your non rrps account first before using hbp. why would you give yourslef a 0% loan?????

Spoken like a true professional. :lol:

Primerica for lifeeeeeeeeeeeeeeeeeeeee.

[charliebrown]

home buyer plan is a scam anyway. anyone taking advantage of it is not too bright., you better taking money out of your non rrps account first before using hbp. why would you give yourslef a 0% loan?????

WOW...if ppl had non RRSP savings, they probably wouldnt need a big mortgage

HBP worked somewhat for my case: I contributed every yr since i started working; and luckily, some of it
grew...so of the $20K i withdrew, i probably only contributed about $16k of it. That $4k of growth was
not taxed (reminder to all HBP holders to repay over 15 yrs, in the 2nd yr following yr of withdrawal!)

let me see...taking out a 0% loan = no cost to me
or borrowing $20K from the bank @ PRIME = $1200 a yr cost of financing

It's a good thing most ppl on the board discount some of your comments or profits at primerica/travellers/similar investment "advisor" setups will be through the roof

[flito ray]

Spoken like a true professional. :lol:

Primerica for lifeeeeeeeeeeeeeeeeeeeee.

There is just one problem with these diversion programs, and the others that are almost sure to follow as the twenty-first century unfolds. They can take an immense toll on the future retirement income of anyone who uses them. Let's take the case of a thirty-year-old woman who withdraws twenty thousand dollars from her RRSP under the Home Buyers' Plan and repays the loan over the fifteen year period allowed by the government. If she had left the money in the plan, it would have grown to $295,700 at age sixty-five, assuming an average annual compound rate of return of eight percent. But the effect of the loan and the fifteen-year repayment is to reduce the end value of that twenty thousand dollars to just under one hundred and seventy thousand dollars.

If she converts her RRSP to a RRIF at age sixty-five and starts drawing income from it immediately, the impact will be to reduce her annual income by more than five thousand dollars. And that deficiency will increase with every passing year. That's the part the politicians never talk about.

[yugiohm3]

There is just one problem with these diversion programs, and the others that are almost sure to follow as the twenty-first century unfolds. They can take an immense toll on the future retirement income of anyone who uses them. Let's take the case of a thirty-year-old woman who withdraws twenty thousand dollars from her RRSP under the Home Buyers' Plan and repays the loan over the fifteen year period allowed by the government. If she had left the money in the plan, it would have grown to $295,700 at age sixty-five, assuming an average annual compound rate of return of eight percent. But the effect of the loan and the fifteen-year repayment is to reduce the end value of that twenty thousand dollars to just under one hundred and seventy thousand dollars.

If she converts her RRSP to a RRIF at age sixty-five and starts drawing income from it immediately, the impact will be to reduce her annual income by more than five thousand dollars. And that deficiency will increase with every passing year. That's the part the politicians never talk about.

You are talking like a politican too ... if you can earn 8% inside the RRSP without any risk, then you probably have to borrow that 20K from a bank with 10% interest. In addition, 20K in RRSP is like 28K in normal income with 30% marginal tax rate so you probably should compare a 28K loan from a bank with 10% interest rate vs 20K from RRSP with 8% interest rate.

[konfusion666]

Spoken like a true professional. :lol:

Primerica for lifeeeeeeeeeeeeeeeeeeeee.

i've said it before and i'll say it again... posting misinformation on this forum should result in disciplinary action.

[majesus]

i've said it before and i'll say it again... posting misinformation on this forum should result in disciplinary action.

It's the Good, the bad, and the Ugly.

Flito ray and Yugiohm3 did bring out some good things to know from both sides of the flip coin. I'm glad he said it... keeps me informed on many angles of the topics. But you are right, be careful on what you read.

[dark169]

home buyer plan is a scam anyway. anyone taking advantage of it is not too bright., you better taking money out of your non rrps account first before using hbp. why would you give yourslef a 0% loan?????

a zero% loan from yourself sure beats paying 5-7% on that money in a mortage. the HBP allows people to get into a home sooner.

[chococrazy]

There is just one problem with these diversion programs, and the others that are almost sure to follow as the twenty-first century unfolds. They can take an immense toll on the future retirement income of anyone who uses them. Let's take the case of a thirty-year-old woman who withdraws twenty thousand dollars from her RRSP under the Home Buyers' Plan and repays the loan over the fifteen year period allowed by the government. If she had left the money in the plan, it would have grown to $295,700 at age sixty-five, assuming an average annual compound rate of return of eight percent. But the effect of the loan and the fifteen-year repayment is to reduce the end value of that twenty thousand dollars to just under one hundred and seventy thousand dollars.

If she converts her RRSP to a RRIF at age sixty-five and starts drawing income from it immediately, the impact will be to reduce her annual income by more than five thousand dollars. And that deficiency will increase with every passing year. That's the part the politicians never talk about.


This sounded too intelligent for the poster (let's sit back and remember the 'what's the difference between gross and net' fiasco!) so I checked, and sure enough, it's from Gordon Pape's site :lol:

http://www.buildingwealth.ca/Books/index.cfm?bid=2

You know, if you're going to quote something from a site, don't pass stuff off as your own. Typical coming from you.

[cadave]

This sounded too intelligent for the poster (let's sit back and remember the 'what's the difference between gross and net' fiasco!) so I checked, and sure enough, it's from Gordon Pape's site :lol:

http://www.buildingwealth.ca/Books/index.cfm?bid=2

You know, if you're going to quote something from a site, don't pass stuff off as your own. Typical coming from you.

Wow. That's disgusting.

[controlyar]

Like I have said many times...Primerica is a DISGRACE of a company.

I wonder what "Primer" has to say about this.
I imagine he will write some manipulating statement attempting to justify the behaviour of an imbecile (Flito Ray).

[konfusion666]

You know, if you're going to quote something from a site, don't pass stuff off as your own. Typical coming from you.

and to follow-up on my previous post, engaging in plaigiarism on RFD should result in disciplinary action also... :twisted:

[pitz]

Wow. That's disgusting.

Yeah, and Gordon Pape, as usual, is full of crap with some of his 'suggestions'. Its kind of hilarious that such garbage would be copied here.

Isn't he the guy who is a shill for those rip-off reverse mortgages (really, just a grossly overpriced mortgage packaged with some life insurance, at an exhorbiant cost)?

See some of my other postings which describe how using the HBP is a very intelligent thing to do, and actually enhances long-term growth of a retirement investment portolio if implemented properly.

[ullyeus]

This sounded too intelligent for the poster (let's sit back and remember the 'what's the difference between gross and net' fiasco!) so I checked, and sure enough, it's from Gordon Pape's site :lol:

http://www.buildingwealth.ca/Books/index.cfm?bid=2

You know, if you're going to quote something from a site, don't pass stuff off as your own. Typical coming from you.

ahhahah

I was so confused by his post, I had also replied to it a few times giving him a compliment on a basic understanding and english. funny.

[siwong44]

home buyer plan is a scam anyway. anyone taking advantage of it is not too bright., you better taking money out of your non rrps account first before using hbp. why would you give yourslef a 0% loan?????

You my son.... dont sound to bright...