The Canadian Home Buyers' Plan: Everything You Need to Know
Are you a first-time home buyer looking to use your RRSP savings to help fund your down payment? The Home Buyers' Plan (HBP) could be a valuable tool in your home buying journey.
In this post, I’ll cover everything you need to know about the HBP, including how to qualify, how to make withdrawals, and how to repay the funds.
What is the Home Buyers' Plan?
The Home Buyers' Plan is a Canadian government program that allows eligible first-time home buyers to withdraw up to $60,000 from their registered retirement savings plan (RRSP) to put towards a down payment on a qualifying home. This can provide a significant boost to your home buying power.
Who Qualifies for the HBP?
To be eligible for the HBP, you must meet the following criteria:
- Be a resident of Canada
- Have a written agreement to buy or build a qualifying home (this includes existing homes as well as new construction)
- Have not owned a home that you occupied as your principal residence in the last 4 years (with some exceptions for those going through a marital breakdown)
- Intend to occupy the home as your principal residence within 1 year of acquisition
You can also use the HBP to help a specified disabled person acquire a qualifying home.
How to Withdraw Funds from Your RRSP
To make a withdrawal under the HBP, you'll need to complete the Home Buyers' Plan (HBP) Request to Withdraw Funds from an RRSP form (T1036). This form requires you to provide details about the home purchase, your financial institution, and your eligibility.
You generally need to receive all your HBP withdrawals in the same calendar year, up to the $60,000 maximum. Once your financial institution processes the withdrawal, you're ready to put those funds towards your down payment.
Repaying Your HBP Withdrawal
Currently, your repayment start date is deferred for a total of 5 years. Previously, you'd have to start repaying the HBP withdrawal 2 years after you first took the money out. However, a recent change to the rules provides some extra time before you need to start paying it back. As it stands today, HBP withdrawals made between 2022-2025, don’t need to begin repayment for 5 years.
Once the repayment period starts, you have 15 years to pay back the full amount. The minimum annual repayment is 1/15th of what you originally withdrew.
For example, if you took out $30,000 through the HBP in 2024, your minimum annual repayment would be $2,000 per year for 15 years starting in 2029.
Reporting Your HBP Repayments
Each year, you'll need to report your HBP repayments on Schedule 7 of your tax return. This form allows you to designate the amount you've contributed to your RRSP as an HBP repayment.
The Canada Revenue Agency (CRA) will also send you an annual HBP Statement of Account with your Notice of Assessment, which will detail your remaining balance and required repayment amount.
The Home Buyers' Plan can be a valuable tool for first-time home buyers, but it's important to understand the eligibility criteria, withdrawal process, and repayment requirements. By planning ahead and utilizing this program effectively, you can give your homeownership dreams a boost. Give me a call to discuss your eligibility today!