RRSP Home Buyers’ Plan
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August 29, 2018

According to the federal government’s Home Buyer’s Plan (HBP), as a first-time homebuyer, you can borrow up to $25,000 from your RRSP and use it to pay the down payment without incurring any taxes.

If you’re partnering with another buyer who is also purchasing residential property for the first time, you can both take loans of $25,000 from your individual RRSPs. You can thus pay a total of $50,000 towards the down payment of your home. However, if only you’re a first-time homebuyer, you should not have used a property owned by your spouse or common-law partner as your primary residence in the last 4 years.

Here is some other information you may need.

  • The amount withdrawn from the RRSP is a loan and must be paid
  • You should be a resident of Canada.
  • You must have the RRSP funds in your account for a minimum of 90 days before you can withdraw it.
  • You should be buying a home for the first time in the past 4
  • If your spouse or common-law partner has owned a home before, you should not have lived in the house he or she owned in the last 4
  • You need to have a written agreement for the purchase or construction of a qualifying home.
  • You must intend to move into the new home and use it as your primary residence within 12 months of the date of purchase.
  • If you have borrowed from the RRSP before, you should have paid back the entire amount before applying for a new loan.
  • Once you acquire the title of the property, you must borrow the funds within 30 days.
  • If you’re applying for an RRSP loan but don’t meet the conditions for a first time home buyer, you’ll incur tax on the withdrawal. The law requires you to add it as taxable income into your income tax

Procedure for Home Buyer’s Plan (HBP)

  1. Check if you have had the funds in your RRSP account for 90 days before withdrawal.
  2. Make sure you withdraw the funds you need within 30 days of acquiring the title of the home. If you withdraw funds after this window, the loan will no longer qualify as HBP assistance, and you’ll incur the applicable tax on it.
  3. Log onto the Canada Revenue Agency’s website (cra-arc.gc.ca ). Locate the Form T1036 and print a copy.
  4. Complete Section 1 and submit it to the financial institution that manages your RRSP.
  5. They will complete Section 2 and send you a T4RSP form. This form confirms the exact amount that you have withdrawn from the RRSP under the Home Buyers’ Plan.
  6. Add details of the withdrawal in the income tax return you file for the withdrawal year.

Repayment of the RRSP

The government expects that you will pay back the RRSP loan within 15 years of taking the amount. You must also begin making payments two years after the date of the withdrawal. You’ll receive a Notice of Assessment from the Canada Revenue Agency. This document will have details of the amount you’ve repaid, the remaining loan amount, and the amount of the next payable installment. When you begin making payments towards your loan amount, you’ll pay the first installment in the repayment year or the initial 60 days of the next year. 

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