Lease Option Deposit/Fee

[GordonDaniel]

Hello All,

I just spoke with a potential tenant buyer who asked if he could use his RRSP`s as an Option "deposit".

If I understand correctly, you can use your RRSP`s as down payment for your personal residence and not be taxed on them, as long as you pay them back within a certain time frame, correct? Would this work for a lease option tenant?

While I`m on the topic, how about buyers using RRSP`s as a down payment when you are going to finance them via Seller Financing?

Any insights here are much appreciated, thank you!

Cheers,
Gord




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[antaynguy]

QUOTE (GordonDaniel @ Apr 27 2010, 12:56 PM) Hello All,

I just spoke with a potential tenant buyer who asked if he could use his RRSP`s as an Option "deposit".

If I understand correctly, you can use your RRSP`s as down payment for your personal residence and not be taxed on them, as long as you pay them back within a certain time frame, correct? Would this work for a lease option tenant?

While I`m on the topic, how about buyers using RRSP`s as a down payment when you are going to finance them via Seller Financing?

Any insights here are much appreciated, thank you!

Cheers,
Gord




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Hi Gordon,

As far as I understand it, you cannot use RRSP as an Option deposit.
For Seller financing, I believe you can use RRSP as a downpayment as the buyer owns the house.

Cheers!

 

[MonteDobson]

QUOTE (GordonDaniel @ Apr 27 2010, 12:56 PM) Hello All,

I just spoke with a potential tenant buyer who asked if he could use his RRSP`s as an Option "deposit".

If I understand correctly, you can use your RRSP`s as down payment for your personal residence and not be taxed on them, as long as you pay them back within a certain time frame, correct? Would this work for a lease option tenant?

While I`m on the topic, how about buyers using RRSP`s as a down payment when you are going to finance them via Seller Financing?

Any insights here are much appreciated, thank you!

Cheers,
Gord
Hi Gord,

No he cannot use his RRSP`s as the option deposit. This needs to be CASH. There is a first time homebuyers program where you can withdraw up to $25K from your RRSP`s to put towards a down payment, but this occurs at closing ie. when he qualifies for a mortgage and is ready to purchase.

To answer your 2nd question, RRSP`s are mortgages and cannot be used as a down payment, unless the transaction qualifies under the HBP (Home Buyers Plan). RRSP`s can be used in a VTB situation where you hold a mortgage position on a property, as long as you don`t still own it (as per Arms Length rules). ie. if you own a property and want to sell to someone via seller financing. You can hold that financing inside your RRSP as a mortgage.

More information on the RRSP Home Buyers plan at http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rr...p/menu-eng.html

 

[GordonDaniel]

Thanks for the info Monte!

 

[markl]

RRSP`s can be used but they cannot stay in the RRSP. They can be withdrawn and taxes paid on them. When the RRSP can be used is when the buyer purchases the option from you and is getting a mortgage from the bank.

We typically advise out clients to leave the money in the RRSP`s and use the HBP at the end of the term. As long as they meet our minimum requirements for our deposits.

Regards,