Tag Archives: home buyer’s plan

How to Use the Home Buyers Plan

Way back when, I had talked about how one can use the RRSP for the Home Buyers Plan.  Having bought my first home recently, I found the home buyers plan information on the Canada Revenue Agency website a bit difficult to understand (must be all that government lingo), so I thought I would simplify it in easy to understand terms and spell it out step by step on how take advantage of the HBP.

First off, in case you haven’t heard of the Home Buyers Plan, I’ll try to explain it.

It’s where a first time home buyer (you and whoever you buy the home with) can each withdraw up to $25,000 from your RRSP tax-free.  The caveat is that you have to repay it within 15 years, following the second year after the home is bought.

e.g. if you buy the home in 2010, you will have to start repaying the Home Buyers Plan withdrawal in 2012.

Conditions in order to be eligible for the HBP plan:

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HBP: Home Buyers Plan and LLP: Lifelong Learning Plan

This is another “bonus” for RRSP’s. I think I would definitely take advantage of it, if you have that much money saved up in your RRSP’s.

The Home Buyers Plan

The Canadian government recently up’d the amount from $20,000 withdrawal, to $25,000 this year (2009).
The main catch is that you have to be a first time homebuyer and that all the written agreements/ contracts are in place before you withdraw from your RRSP.
You don’t have to take it all out all at once, too. You can take some out first, and if you anticipate that you need more cash, you can take some out a few months down the road, as long as it’s all done within January of the following year of your home purchase.

Then you have to start repaying the money you withdrew. You would owe about 1/15 of that amount each year until you reach the 15th year.  The catch is that the money you contribute back into your RRSP is not tax deductible.

What do you think of the Home Buyers Plan?

Do you plan to utilize the Home Buyers Plan?

LLP: Life Long Learning Plan

home buyers plan

I’ve always been a proponent of lifelong learning.  The Canadian government seems like they are supportive too!

The LLP allows you to withdraw money from your RRSP for full time education that is an accredited post secondary educational institution.

You can take out a max of $10,000 per year, up to a max of $20,000 after four years of the first LLP withdrawl.

Then you have 10 years to pay the money back (like the HBP, you have to pay 1/10 of your RRSP back each year), but this starts after the 4th or 5th year from your first withdrawl for your RRSP’s.

Really detailed information on the LLP can be found here on the CRA website:

http://www.cra-arc.gc.ca/E/pub/tg/rc4112/rc4112-e.html#P316_27011