The Home Buyer Plan and your RRSP’s

A common question, in today’s residential economic marketplace…

I really want to purchase a home but am having a hard time saving for the down payment. Can I use my RRSP to buy my first home?

Yes, you can use your registered retirement savings plans (RRSPs) money to help buy your first home. Because saving for a down payment is generally a very big hurdle for many first time home buyers, the Canadian government created the Home Buyer Plan (HBP) to help people overcome this hurdle. The HBP is a program that allows you to withdraw funds from your RRSPs to buy or build a qualifying home. You can withdraw up to $25,000 in a calendar year.

Overall the requirements of the program are quite favourable for the new home purchasers. Generally, you have to repay all withdrawals to your RRSPs within a period of no more than 15 years. You will have to repay an amount to your RRSPs each year until your HBP balance is zero. If you do not repay the amount due for a year, it will have to be included in your income for that year.

To be eligible:
You must be considered a first-time home buyer;
You must enter into a written agreement to buy or build a your first home. Obtaining a pre-approved mortgage does not satisfy this condition;
You must intend to occupy the home as your principal residence within one year after buying or building it; and your repayable Home Buyer Plan balance on January 1 of the year of the withdrawal must be zero.

There are further RRSP withdrawal conditions, some of which are:
You have to be a Canadian resident.
You have to receive all withdrawals in the same calendar year.
Your maximum withdrawal is $25,000.

Your RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the HBP, or the contributions may not be deductible for any year.
You cannot own the qualifying home more than 30 days before the withdrawal is made.
You have to buy or build your home before October 1 of the year after the year of the withdrawal.
You have to complete Form T1036 for each eligible withdrawal.

If you are ready to proceed, you must complete Form T1036 for each withdrawal and give it to your RRSP issuer. Your issuer will provide you with your withdrawn funds and send you a T4RSP statement. You will then include all your T4RSP statements in your next income tax return.

As always, if you have any questions about the information above or your mortgage in general, I’m here to help. Please feel free to contact me at anytime.