You’ve been thinking about it for a few years, but you wanted to make sure you were well prepared before making such a major investment. If you’re ready to become a homeowner, you have several options. For first-time home buyers or those who have gone more than five years without owning a home,[1] one option is the Home Buyers’ Plan (HBP).
What is the Home Buyers’ Plan (HBP)?
The Home Buyers’ Plan (HBP) is an attractive solution for assembling a down payment. This federal government program lets you withdraw money from your registered retirement savings plans (RRSPs) for the sole purpose of buying or building a home for yourself or for a relative with a disability, whether they are your spouse, child, or other member of your family. The program allows you to withdraw up to $25,000.
What happens next?
Once you’ve used the funds to buy your house, you need to repay the same amount to your RRSP. You will have 15 years, after a 2-year grace period, to repay a portion of the funds withdrawn from your registered retirement savings plans every year, until the full amount is repaid. If you are unable to make your annual repayments, the amount due will be included in your income for the year in question, and will therefore become taxable.
To help you understand the HBP and plan your purchase, here are the important points to remember:
Eligibility conditions for the HBP (this list is not exhaustive)
- You must be a resident of Canada.
- The home you are buying or building must be must be your first home, or you must have gone at least five years without owning a home.
- Your RRSP contributions must remain in your RRSP account for at least 90 days before you can withdraw them for use under the HBP.
Eligible amount and withdrawal conditions (this list is not exhaustive)
- You can withdraw up to $25,000.
- You have up to 30 days after becoming a homeowner to withdraw the funds.
Repaying your withdrawal (this list is not exhaustive)
- After a 2-year grace period, you have 15 years to repay the amount withdrawn from your RRSP.
- The minimum annual payment is equal to 1/15th of the amount withdrawn, until the full amount is repaid.
Conditions to be met by the property (this list is not exhaustive)
- The home must be bought or built, in Canada, before October 1 of the calendar year after the year of the withdrawal from the RRSP.
- It must be the homeowner’s principal place of residence no later than one year after it is bought or built.
If you have any questions or would like to learn more about the Home Buyers’ Plan (HBP), don’t hesitate to contact or make an appointment with the Mortgage Development Manager assigned to your office, who will be happy to help you.
Please consult the applicable government publications for details.
The contents of this document are provided for information purposes only, and are not comprehensive. They do not create any legal or contractual obligations for National Bank or its affiliates. For financial advice or information on your savings options, please consult your National Bank advisor or an industry professional (e.g., accountant, tax specialist or lawyer).
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[1]The first HBP used must be repaid in full before the buyer can take out a second HBP.
