If you’re planning to buy a home in Canada, you may have heard about using your RRSP to help with the down payment. Most people know about the Home Buyers’ Plan (HBP), which lets first-time buyers withdraw up to $35,000 from their RRSP tax-free. But what if you’ve owned a home before?
Here’s what you need to know if you’re not a first-time buyer — and whether your RRSP can still help you get into your next home.
TL;DR: Can You Use RRSPs If You’re Not a First-Time Buyer?
- You usually can’t use the Home Buyers’ Plan if you’ve owned a home in the last 4 years
- But there are exceptions — like if you’ve gone through a marriage breakdown
- Even if you’re not eligible for HBP, you can still use RRSPs in other ways
Who Qualifies as a “First-Time Home Buyer”?
The Canada Revenue Agency has a specific definition. You’re considered a first-time buyer if you didn’t occupy a home that you (or your spouse or common-law partner) owned in the four years leading up to your home purchase.
So, if you sold your previous home more than four years ago and haven’t lived in one you own since, you may qualify again — even if you’ve owned property in the past.
Exception: Separation or Divorce
If you’ve gone through a breakdown of marriage or common-law partnership, you might qualify to use the Home Buyers’ Plan again — even if you owned a home recently.
To be eligible under this rule:
- You must be living apart for at least 90 days
- You must not be living in the former shared home (or must intend to buy out your ex’s share)
- You must meet all other HBP requirements
This rule allows separated individuals to access their RRSPs as if they were first-time buyers again.
What If You Don’t Qualify for HBP?
You can still withdraw money from your RRSP, but it will be taxable income in the year you take it out. That could trigger a hefty tax bill — especially if you’re also earning a full-time income.
Some buyers choose to:
- Make a withdrawal in a low-income year, such as during a job change or career break
- Use TFSA savings instead, which come out tax-free and without restrictions
- Rely on gifts or non-registered investments for their down payment
Can You “Reset” Your HBP Eligibility?
There’s no official way to reset eligibility other than meeting the 4-year rule or qualifying under the separation criteria. That said, if enough time has passed since you owned and occupied a home, you could become eligible again — even if you’ve owned one before.
What We See in Ontario
In Guelph, Fergus, and surrounding areas, many second-time buyers are surprised to learn they may not qualify for the Home Buyers’ Plan — especially couples who sold their first home a few years ago and are now looking to upsize. In these cases, we often help buyers plan around their RRSPs and consider other options like tapping into TFSAs or structuring a gifted down payment properly.
Final Word
If you’re not a first-time buyer, your ability to use RRSP funds for a down payment is limited — but not impossible. Understanding the CRA’s definition of “first-time” and exploring exceptions like separation can open doors.
Need help figuring out if you qualify, or exploring other ways to fund your down payment? Reach out to The Local Broker for local, no-pressure advice.
