– Yes, if you have a good chunk of money sitting in your Registered
Retirement Savings Plan (RRSP), you may be eligible to use some of it
towards the purchase of a home under a federal government plan called the
Home Buyer’s Plan (HPB). Naturally, there’s a long list of rules and
regulations, but if you’re a young couple, it could mean as much as an
extra $50,000 to tack on to a down payment.
Essentially, the HPB allows first-time home buyers who meet certain
conditions to withdraw up to $25,000 from their RRSPs in a calendar year to
buy or build a qualifying home. Even better, that amount will not be
included in your income and tax will not be withheld on the withdrawal.
The downside of the HBP is that you’re taking money out of your RRSP, so it
will no longer be growing and compounding within the plan on a tax-deferred
basis. However, because you’re putting the funds towards the purchase of
residential real estate, you may still come out ahead. That’s because any
realized gain in the value of your property when you sell is covered by the
Principal Residence Exemption, so you won’t pay tax on any capital gain on
your home when you sell. In addition, you have to repay the HBP withdrawal
back into your RRSP on a regular basis over a maximum of 15 years, so
you’ll still be rebuilding your RRSP over time.
In Canada residential real estate, especially in larger urban markets, has
historically been a good investment, at least keeping pace with the rate of
inflation, and often exceeding it by a wide margin. So if you choose the
right home in the right location, anything you give up in your RRSP in
terms of growth you’re likely to make up in the increase in value of your
real estate. But this is always something of a crapshoot. Consider your HBP
withdrawal as a source of funds for a place to live, not as a speculative
real estate venture!
Rules for HBP withdrawals
First of all, you have to have a Registered Retirement Savings Plan.
There’s no minimum amount, but it usually doesn’t make sense to withdraw
funds for a down payment unless you already have a good-size chunk socked
away in the RRSP. The maximum you can withdraw under the HBP is $25,000.
And then only if you meet the following conditions:
* You are a Canadian resident and have entered into a written agreement to
buy or build a qualifying home. A “qualifying home” is just about any type
of housing unit located in Canada.
* You are using the home as your principal residence within a year of
buying or building it. However, according to the Canada Revenue Agency,
even if you do not buy or build the qualifying home before Oct. 1 of the
year after the year you withdrew the funds, you will still be eligible for
the HBP withdrawal if either of the following situations applies:
1) You had a written agreement, in effect on Oct. 1 of the year after the
year you withdrew the funds, to buy a qualifying home or replacement
property, and you buy the property before Oct. 1 of the second year after
the year of the withdrawal. And you were a Canadian resident up to the time
2) For a home being built, you had paid your arm’s-length contractors an
amount for materials after the date of the first withdrawal and before Oct.
1 of the year after the year you withdrew the funds that was at least equal
to the total of all withdrawals under the HBP.
* You are a first-time home buyer. Generally, if you or your spouse or
partner owned a principal residence within four years before your HBP
withdrawal, you won’t qualify. However, if you are eligible now because
you’re still inside the four-year limit, you may still be considered a
first-time home buyer later, once the four-year period has passed.
* You repay the amounts you’ve withdrawn back into your RRSP over a maximum
15-year period. The minimum annual repayment is 1/15 of the total initial
withdrawal. You may, of course, pay back more and faster if you wish or are
able to do so – which makes sense, given that you want your funds working
for you in your RRSP.
To make an RRSP withdrawal under the HBP, you have to complete and file
CRA Form T1036-17e. The Home Buyer’s Plan can be complicated, so getting advice from a
qualified financial planner ahead of time is a good idea.
Robyn Thompson, CFP, CIM, FCSI, is the founder of
Castlemark Wealth Management, a boutique financial advisory firm specializing in wealth management
for high net worth individuals and families. She is also listed as a
MoneySense Approved Financial Advisor. Contact her directly by phone at 416-828-7159, or by email at
for a confidential planning consultation.
Notes and Disclaimer
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