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The Canadian government offers the Home Buyers’ Plan (HBP) which allows first time home buyers to withdraw RRSP funds to use towards the purchase of a principal residence.  If you are not sure if this is a sound option, let’s connect for a quick chat to run through your current situation.

How does RRSP work for first time home buyers?

Home buyers that have never been registered on title as a property owner can elect to withdraw up to $35,000 from their RRSP to use as the down payment on a home purchase.  In the case where two first time home buyers are purchasing a home together, each buyer can access the $35,000 amount.

The process is straightforward.  Applicants must complete a Form T1036 – Home Buyers’ Plan (HBP) Request to withdraw Funds from an RRSP.  Once completed, present it to the Financial Institution administering your RRSP.  It takes approximately five-business days for the funds to be deposited into your account.

How long do you have to repay RRSP for first time home buyers?

You have 15-years to repay the money back to your RRSP account.  The repayments can start after two years after the initial withdraw.  The repayment can be done all at once or you can put money back each year (i.e. at income tax refund time).  If at the end of the 15-years, if there is an outstanding balance, that amount will be taxed as income in year 16.

Are there RRSP first time home buyer disadvantages?

The biggest disadvantage is that there is no income tax benefit on the repayments.  It is not treated as a contribution.  This is because the income tax benefit was received on the initial RRSP contribution.

Another disadvantage is that funds cannot be withdrawn from locked-in RRSP accounts.  For example, an employer-based RSP.

For more information please email to [email protected] or book a no obligation consultation – Let’s chat.