TORONTO, ONTARIO--(Marketwired - Jul 22, 2013) - As part of BMO Financial Group's ongoing commitment to financial literacy and 'Making Money Make Sense', BMO is releasing a financial tip every day in the summer to help Canadians make the 'BMOst of summer' in 2013.
BMO's Tip of the Day: Use your RRSP to help make the down payment on your first home.
For Canadians looking to purchase their first home this summer, one way to come up with a bigger down payment is to take advantage of the federal government's Home Buyer's Plan (HBP). The HPB allows you to make a tax-free withdrawal of up to $25,000 from your RRSP. If your spouse qualifies, he or she may do the same, for a combined total of $50,000.
According to a BMO survey, the average amount first-time buyers plan to spend on their home purchase is approximately $300,000, with an average down payment amount of $48,000 (16 per cent).
"A bigger down payment can significantly reduce the interest you'll pay over the life of your mortgage. Also, with a down payment of at least 20 per cent, you avoid having to pay mortgage default insurance," said Frances Hinojosa, Mortgage Expert, BMO Bank of Montreal. "First-time home buyers should stress-test their mortgage against a higher interest rate to ensure they can manage a rise in costs as a result of a potential increase in interest rates down the road."
Ms. Hinojosa added that it's also wise to choose a mortgage with a shorter amortization, which can help homeowners become mortgage-free sooner.
BMO offers a number of products and services that can help Canadians get more out of every dollar they spend this summer. For more details on how to make the 'BMOst of Summer,' drop by a BMO branch or visit www.bmo.com.
About BMO Financial Group
Established in 1817 as Bank of Montreal, BMO Financial Group is a highly-diversified North American financial services organization. With total assets of $555 billion as at April 30, 2013, and more than 46,000 employees, BMO Financial Group provides a broad range of personal and commercial banking, wealth management and investment banking products and solutions.