Our First Home: Buy your home with an RRSP-funded down payment

Our First Home: Buy your home with an RRSP-funded down payment

What’s the Home Buyers’ Plan (HBP)?

The federal Home Buyers’ Plan lets Canadians withdraw up to $25,000 in a tax-free loan from an RRSP account to make a down payment or add money to an existing one.

 

You’ll have 15 years (plus a grace period) to pay back your loan. You may also use this plan more than once in the future, so long as you did not own any property within the previous five years, a spouse is also a first-time buyer, and you’ve repaid any other loans that are on this plan.

 

How do I qualify for the HBP?

For first-time home buyers, qualifying means having to meet requirements for both RRSP withdrawals and the Home Buyers’ Plan.

 

Typically, accessing this Plan comes with the following general criteria:

  • You must be a Canadian resident(citizen or permanent resident)
  • You must not have owned any property within the most recent 4 years
  • Any RRSP funds you borrow must be in your account for at least 90 days before withdrawal
  • If you are purchasing a home and live with a common-law partner or spouse who owns property or is not a first-time buyer, you must not have lived with them during the previous 4 years
  • You have a written agreement or confirmation of a purchase or building of a qualifying home
  • You must live in the home as your primary residence within 1 year of its purchase
  • If you have a previous loan with the Home Buyers’ Plan, you must not owe any outstanding balances and/or the loan must be paid back in full
  • The RRSP withdrawal you make must be made within 30 days of receiving your home’s title

What does the HBP application process involve?

To get started with the application process, first print out a copy of Form T1036. Form T1036 is a request form to withdraw funds from your RRSP for you to use in the HBP. 
You should only complete Area 1 of the form; your lending financial institution holding your RRSP will complete Part B.

 

Once the form is processed, you’ll receive a T4RSP slip in the mail. The T4RSP slip shows you how much you’ve withdrawn from your RRSP.

 

On line 27 of this slip, you can see how much your Home Buyers’ Plan contribution is worth. The T4RSP will also show any income taxes you’ve paid on the withdrawal amount.

 

How will the HSP loan be paid back?

After the two-year grace period ends from your housing purchase date, you’ll have to start making annual payments on your HSP loan for a maximum of 15 years. Your CRA Notice of Assessment will indicate how much of your loan you’ve repaid, what amount you must pay for that year, and any balance remaining on the loan.

 

Can I apply for the HBP with a partner?

Of course. If you have a partner or spouse who also has an individual or spousal RRSP, then they can also withdraw $25,000, making your net contribution worth $50,000.

 

Do people with disabilities qualify?

Yes. Persons with disabilities are also eligible to apply for the Home Buyers’ Plan without meeting the first-time buyer requirement. However, the property must adequately meet the accessibility needs of the applicant.

 

What if I make an RRSP withdrawal, but don’t meet the general HBP requirements?

If you don’t meet the Home Buyers’ Plan requirements but still decide to make a withdrawal on your RRSP, then the amount you’ve requested will be taxed. You must claim it on your next income tax statement as taxable income.

 

When should I make RRSP withdrawals for my HSP?

Be sure to make your RRSP withdrawal within 30 days of acquiring your home’s title. If you make the withdrawal past 30 days, your loan will not be considered for the HBP and is considered taxable income.

 

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A Maryland native and Toronto-area transplant/graduate of the University of Toronto, Christine is a content writer at Loanerr. When not writing articles, she's an avid swimmer, cat lover, violinist in a indie band, and a humble food aficionada.