Using RRSPs to buy your first home through the HBP
by Mortgage Intelligence Mortgages
What you’ll learn
- What are the eligibility requirements under the HBP?
- What is the HBP?
- How much money can I withdraw from my RRSPs under the HBP?
- How does the repayment of RRSP funds under the HBP program work?
Updated September 9th 2019.
Buying your first home can certainly be an adventure, so it’s important to use all the relevant information available to help ensure a smooth ride during your homeownership journey. Let’s see what you already know, and more importantly, what you can learn about the popular Home Buyers’ Plan (HBP) program.
The 101s of the HBP
According to the Canada Revenue Agency (CRA): The Home Buyers’ Plan (HBP) is a program that allows you to withdraw up to $35,000 (applicable to withdrawals made after March 19, 2019) in a calendar year from your registered retirement savings plans (RRSPs) to purchase or build a qualifying home.
Divorced or separated persons will also be allowed to participate in the HBP, even if they do not meet the requirement to be first-time home buyers. This measure will apply to withdrawals made after 2019.
In a nutshell, you’ve been putting money aside for a while in an investment fund linked to an RRSP account that has hopefully grown over time. Thanks to the HBP program you can now withdraw a portion of it, with no penalty, to use as a down payment (or any other expenses related to the purchase of a home or condominium). Remember, your down payment must be at least 5% of the total value of the property.
Eligibility conditions under the HBP
No surprise the HBP program includes that certain terms and conditions are met. Here are the main ones regarding eligibility. First, you must intend to live in the house you are purchasing through the HBP program. Also, you may still qualify as a first-time buyer and be eligible for the program, even if the dwelling is not your first home. You must also comply with the terms and conditions of the four-year period, as explained on the Canadian Revenue Agency CRA website: You are considered to be a first-time buyer if, during the four-year period you did not live in a dwelling owned by you or your spouse or common-law partner.
You must also satisfy the conditions for an RRSP withdrawal and not exceed an amount of $35,000.
Do you have to repay the RRSP money under the HBP?
Yes. The gist of the program is that it actually allows you to “lend money” to yourself and deposit the funds into an RRSP for the next 15 years without interest. As such, your repayment period begins the second year after your initial withdrawal.
You can also repay the RRSP money at any time, but it’s usually on your annual tax return that you’ll “refund” the RRSP money. Simply notify your accountant and they will arrange that your repayment complies with the applicable laws.
Obviously, this section does not include all the intricacies of a transaction under the HBP program. For more details regarding the program, consult your Mortgage Intelligence mortgage broker!
For more information, visit Canada Revenue Agency website.
- You can “borrow” up to a maximum of $35,000 under the HBP program.
- The repayment period under the HBP program is 15 years.