An RRSP loan works just like any loan and is a great way to take full advantage of the tax benefits and savings opportunities that come with your RSP. Use your loan to top up your RSP contribution and get the biggest possible tax deduction. Then, use your resulting tax refund to pay back the loan.
Want to buy a home for the first time, but don't have the down payment.
Take advantage of the RRSP Down Payment Program. As a first time home buyer in Canada, you have the opportunity to withdraw funds from your RRSP without incurring any tax penalties.
(For Example) Jim & Mary used this Home Buyer Plan to arrange their First Time Home Buyer Loan. They didn't have any RRSP's, but they each have just over $25,000 in contribution room available. Jim & Mary can each take out an RRSP Loan (amortized over 3-5 years) for around $25,000 and contribute this amount to a New RRSP. They must keep the money in their RRSPs for 90 days before they withdraw the funds under the first time HBP. . They take this money and pay off the RRSP Loan of $25k each.The down payment generated is not from the RRSP directly, but it's from the Tax Rebate that they receive because they contributed to their RRSP!