Lease Option Buyer question has me stumped

[JimSlobodzian]

A prospective Lease Option tenant/buyer emailed me a question that has me stumped -

He`s a first-time home buyer asking if he can use his RRSP`s or take advantage of the Home Buyers Plan with the Lease Option???


I`m thinking that this will only come into play in a couple years when he exercizes his "option to purchase" and applies for his mortgage financing with a broker - (is that correct?)


Or can the Buyer use his RRSP`s now as part of his Option fee (down payment)?

 

[MonteDobson]

QUOTE (JimSlobodzian @ Nov 19 2009, 08:27 PM) A prospective Lease Option tenant/buyer emailed me a question that has me stumped - He`s a first-time home buyer asking if he can use his RRSP`s or take advantage of the Home Buyers Plan with the Lease Option???

I`m thinking that this will only come into play in a couple years when he exercizes his "option to purchase" and applies for his mortgage financing with a broker - (is that correct?)

• Yes, he could only exercise this option when he actually qualifies for the mortgage and completes the purchase.

• Or can the Buyer use his RRSP`s now as part of his Option fee (down payment)?
  Nope

 

[Thomas Beyer]

QUOTE (JimSlobodzian @ Nov 19 2009, 07:27 PM) Or can the Buyer use his RRSP`s now as part of his Option fee (down payment)?
no

QUOTE (JimSlobodzian @ Nov 19 2009, 07:27 PM) I`m thinking that this will only come into play in a couple years when he exercizes his "option to purchase" and applies for his mortgage financing with a broker - (is that correct?)
yes, he can use his RRSP as a mortgage, using a CMHC insured mortgage at certain institutions like OlympiaTrust or CWT or B2B Trust, but it means that he has lots of RRSP money as THE ENTIRE MORTGAGE has to be funded from the RRSP ! The RRSP becomes the bank, lending money to the owner using an arms-length protocol specifying certain loan-to-values, loan insurance and interest rate ranges !

 

[JimSlobodzian]

Thank you Monte and Thomas!

I appreciate the guidance.

Cheers,

Jim

 

[RobMacdonald]

You`re correct that this will come into play a couple of years down the road. The buyer will be able withdraw the funds from his RRSP.

Keep in mind though, that the RRSP funds don`t have to be used as the downpayment. If the buyer has provided enough up front with the option, and excess rent over the 2 years, the bank may accept the orignal Lease option agreement as downpayment. The client can still withdraw the RRSP funds and use it towards renovations, or closing costs, or whatever else he chooses.

The First Time Home Buyers program allows a person to withdraw funds in the year that they purchase a principal residence, but doesn`t actually limit them to using the funds for the downpayment.

I haven`t been associated with the actual withdrawls since my days in the banking world, so it would be a good thing to actually read through the FTHB withdrawl for again, but that`s the way I remember it.