A basic overview of the Home Buyers' Plan (HBP)

The recent drop in interest rates might have you thinking about buying your first home. The Home Buyers' Plan could help you with that.

In this article we'll cover the basics of what the Home Buyers' Plan is, who qualifies, the rules of the program, and how it might be able to help you.

What is the Home Buyers' Plan?

The Home Buyers' Plan (HBP) is a program that allows you to make a withdrawal from your registered retirement savings plans (RRSPs) and use that money to buy or build a qualifying home for yourself or for a specified disabled person.

Who is eligible for the HBP?

To be eligible for the HBP, you must:

• be considered a first-time home buyer* 
• have a written agreement to buy or build a qualifying home (for yourself or for a specified disabled person)
• be a resident of Canada throughout the period that starts when you make your first eligible withdrawal from your RRSPs under the HBP and ends when you buy or build a qualifying home
• intend to occupy the qualifying home as your principal place of residence within one year after buying or building it**

*If your participation is in respect of a specified disabled person, this condition does not have to be met
**If you buy or build a qualifying home for a specified disabled person, or help a specified disabled person to buy or build a qualifying home, the specified disabled person must intend to occupy the qualifying home as their principal place of residence within one year after buying or building it

How much can I withdraw from my RRSPs?

Budget 2024 increased the limit to $60,000 (from the previous amount of $35,000). The increased withdrawal limit will apply to withdrawals made after April 16, 2024.

Keep in mind that any contributions you want to access must be in your RRSP for at least 90 days before you can use them for the HBP program.

Do I have to pay back the money withdrawn from my RRSP?

Yes you do. You have 15 years in which to do so at a rate of 1/15 of the borrowed amount being due each year.

Example If you took out $60,000, you would have to pay back $4,000 each year (60,000 / 15 = 4,000)

There are no maximum payback limits, so you are allowed to pay more than 1/15 each year, but if you repay less, the difference is considered RRSP income and you will be taxed on it.

Under the new budget, you have up until 5 years to start repaying the funds.

Example If you took out funds in 2025 you would not have to begin repayment until 2030, making the total amount due by 2045.

Do I have to pay tax on the RRSP withdrawal?

No you do not. However, as mentioned above, if you repay less than than 1/15 each year, the difference is considered RRSP income and you will be taxed on it.

Can I withdraw from more than one RRSP?

Yes you can. However, you are only permitted to make those withdrawals in the same calendar year as your first withdrawal, and in January of the following calendar year.

Also, for couples, each person can withdraw $60,000 from their own individual RRSPs, for a combined total of $120,000.

How do I apply for the HBP?

You have to fill out Form T1036, Home Buyers' Plan (HBP) Request to Withdraw Funds from an RRSP for each eligible withdrawal.

You are responsible for making sure that all HBP conditions are met, and the CRA may contact you to ask for more information about your HBP withdrawal.

If you make an RRSP withdrawal under the HBP and a condition is not met, your RRSP withdrawals may be considered ineligible and your RRSP withdrawals would be considered ineligible and treated as taxable income.

Questions?

If you have any questions about this article, need help with the Home Buyers' Plan, or want to know more about the services we offer, please contact one of our Tax Experts or complete the contact form below.