For many first-time homebuyers in Canada, coming up with a down payment is one of the biggest challenges to homeownership. If you have savings in a Registered Retirement Savings Plan (RRSP), you may be able to use those funds to buy your first home—without immediate tax consequences—through the Home Buyers’ Plan (HBP).
This program allows eligible buyers to withdraw up to $35,000 from their RRSPs to put toward a home purchase. But how does it work, and what are the repayment rules? In this guide, we’ll break down everything you need to know about using your RRSP under the Home Buyers’ Plan.
What Is the Home Buyers’ Plan (HBP)?
The Home Buyers’ Plan is a federal program that allows first-time homebuyers to withdraw up to $35,000 from their RRSPs to use as a down payment on a qualifying home. If you’re buying with a spouse or partner, you can each withdraw $35,000, for a combined total of $70,000.
This withdrawal is tax-free, but there’s a catch—you must repay the amount back into your RRSP over time to avoid taxes on the withdrawal.
Who Is Eligible for the Home Buyers’ Plan?
To qualify for the HBP, you must meet the following criteria:
✔ Be a first-time homebuyer – You (or your spouse/common-law partner) cannot have owned a home in the past four years.
✔ Have a written agreement to buy or build a home – You must provide documentation of the home purchase.
✔ Use the home as your primary residence – Investment properties do not qualify.
✔ Be a Canadian resident – You must reside in Canada at the time of the withdrawal and purchase.
If you’re unsure about your financial readiness to purchase a home, use our RRSP Calculator to estimate your contribution potential and tax savings.
How Do You Withdraw RRSP Funds Under the HBP?
The process for withdrawing funds through the Home Buyers’ Plan is straightforward:
1️⃣ Confirm your eligibility – Ensure you meet all HBP requirements.
2️⃣ Complete CRA Form T1036 – Submit Form T1036 (Home Buyers’ Plan Request to Withdraw Funds from an RRSP) to your financial institution.
3️⃣ Withdraw funds – The funds will be provided to you without tax deductions.
4️⃣ Use the money for your home purchase – You must apply the funds toward your home within one year of the withdrawal.
The withdrawn funds must have been in your RRSP for at least 90 days before the withdrawal date.
How Do You Repay the Home Buyers’ Plan?
The HBP is not free money—you must repay the withdrawn amount over 15 years, starting two years after the withdrawal.
Each year, you must repay at least 1/15th of the amount borrowed. If you fail to make the required repayment for a given year, the missed amount is added to your taxable income for that year.
Example of HBP Repayment:
- You withdraw $30,000 from your RRSP under the HBP.
- Your annual repayment amount is $2,000 ($30,000 ÷ 15 years).
- If you don’t contribute at least $2,000 to your RRSP in a repayment year, that amount is added to your taxable income.
Pros and Cons of Using Your RRSP for a Home Purchase
Pros:
✔ Access a larger down payment – This can help you reduce your mortgage amount and lower CMHC insurance costs.
✔ Tax-free withdrawal – Unlike normal RRSP withdrawals, HBP funds are not immediately taxed.
✔ No interest charges – Unlike loans or lines of credit, you are borrowing from yourself with no interest.
Cons:
❌ Reduces your retirement savings – Withdrawing from your RRSP means those funds aren’t growing for retirement.
❌ Must be repaid – If you fail to repay, the withdrawn amount is taxed as income.
❌ Limited withdrawal amount – The $35,000 cap may not be enough for some homebuyers.
Is the Home Buyers’ Plan Right for You?
Using your RRSP for a home purchase can be a great option if you have enough savings and can commit to repaying the amount over time. However, if withdrawing from your RRSP means sacrificing long-term investment growth for short-term benefits, you may want to explore alternative financing options.
Before making a decision, use our RRSP Calculator to see how your contributions and withdrawals will impact your financial future.
If you need expert mortgage guidance, Contact The Local Broker to explore your best options for home financing.
