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RRSP Home Buyers

RRSP Home Buyers Mortgage

Sometimes, the hardest part about purchasing a home is coming up with the down payment. The Canadian Government wants you to own a home, but they understand that finding the funds for a down payment can be challenging. In order for you to be able to purchase your very first home, the government is allowing you to use your RRSP as a down payment.

What Is The RRSP Home Buyers’ Plan?

The Home Buyers’ Plan is tailor-made to people who have some money in their Registered Retirement Savings Plan and want to buy a home. The plan lets you borrow up to $25,000 from your RRSP tax-free for a down payment on your future home.

Can My Spouse/Partner and I Combine Our RRSP’s For a Down Payment?

Yes. If you and your spouse both have RRSP’s, you can each contribute $25,000 to your future home’s down payment.

Why Is Home Buyers’ Plan Considered A Loan?

Even though the money in your RRSP account is technically yours, you will have to pay it back within 15 years. Why? Because it is not being taxed. Since you are basically getting a chunk of your home’s full price tax-free – between $25,000-$50,000 – it is treated like a loan that you must repay.

How Do I Repay My HBP Loan?

Within two years of the day you withdrew the funds from your RRSP, you must begin the repayment process. Don’t worry, Canada Revenue Agency will send you a notice to remind you. This notice will let you know how much you can contribute to your RRSP towards the repayment and when it is due. Usually, it is due in the first two months of the following year.

Am I Eligible For The Home Buyers’ Plan?

In order to be eligible for the HBP you need to meet the below conditions:

  • You must be a Canadian resident
  • The funds you withdraw from your RRSP must be in your account for at least 90 days prior to your taking it out to use as your down payment
  • If you’ve owned a home within the last four years of your withdrawal date you cannot participate in the HBP
  • If your spouse/partner has owned a home in the last four years they are not eligible to withdraw from their RRSP tax-free – however, if you haven’t lived in the house they owned for at least four years then you can still use your RRSP funds
  • You must intend to live in the home you’ve bought for one year after purchase and it must be used as your primary residence
  • You have to make the withdrawal from your RRSP within 30 days of taking the home’s title
  • If the home you intend to purchase has not been built you will need to have a written agreement that says you intend to buy the property

Canada’s mortgage website

Your home is your most valuable asset. It is probably the single largest investment you will make in your lifetime. Your home is more than a place to rest your head and raise a family. Your home contains equity. It is a treasured resource and in some cases, can even be used as an ATM (aka cash back mortgages and HELOCs – don’t worry we’ll get there).

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