How to Use the Home Buyers Plan

The Canadian Home Buyers Plan is a way to borrow from your RRSP in order to come up with a down payment for your first home.  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.

Home-Buyers-Plan-Title

In case you aren’t familiar with the HBP, let’s start with the fact that it allows a first-time home buyer to $25,000 from your RRSP tax-free.  If you are a political junkie you may remember that there were promises of a $35,000 limit during the 2015 Federal Election, but that won’t be happening any time soon.  If you or your significant other have owned a home before you cannot access this plan.  If neither you, nor the significant other you are purchasing a home with (if this is the case) have ever owned a home, each of you can withdraw $25,000 from your respective RRSPs in order to come up with a down payment.

The semi-catch is that you have to pay back that $25,000 over the next 15 years – it’s not “free money” or anything crazy like that.

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Why Bother with the Home Buyer's Plan?

The reason a person might choose to save for a housing down payment within their RRSP rather than in a basic chequing account or TFSA is that the tax-free savings ability allows you to save up for a home much quicker.  The idea is that when you contribute to your RRSP the government will give you a tax refund.  The size of that cheque from the CRA depends on the amount you contributed and what your marginal tax rate was (i.e. how much income did you have last year).  For more information on the specifics of the RRSP click here.  If you take this cheque and deposit it back into your RRSP, you can supercharge your saving.  This would allow your savings to grow much quicker, than if you did things the traditional way, by getting your paycheque from your job (with the income tax taken off – no tax refund in this case) and then putting it in the bank.

If you’re looking for more information on buying a home for the first time, we recommend checking out our completely free eBook: Getting Your Foot in the Door

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Eligibility Conditions for the HBP

  • You have to be a first-time home buyer (or you buying a home for someone who is disabled).
  • You must enter into a written agreement to buy a home or build a home (offer of purchase).  Getting a preapproval from the bank doesn’t cut it.
  • You have to be a Canadian resident (not necessarily a citizen – and citizens don’t automatically qualify).
  • You plan to use the home as a principal residence (not for rental income).
  • This is the big one:  you cannot own the home for more than 30 days before the withdrawal takes place.  (So as you can see, it’s a bit time sensitive!)
  • You have to build or buy the home before October 1 on the year or after the year of withdrawal.
  • You have to have money in your RRSP (duh) and it must be in your RRSP for at least 90 days before you take it out.

How to Take Money From Your RRSP for the HBP

For each withdrawal from each RRSP account (if you have more than one like I do), you will need to complete a T1036 form and answer their questions.  You then bring that to the RRSP issuer (i.e. your bank, credit union, discount brokerage, etc.) and they will help you take the money out so that it’s not subject to the RRSP withholding tax.

Starting the year following your withdrawal, the minimum you will have to repay back to the government is 1/15 of the amount that you took out from your RRSP in the first place.  Here’s an example:

Let’s say you took out $25,000 for a down payment for your condo (got the best rate through your mortgage broker) in 2016.  In 2017  you will have to let the government know that you have re-deposited 1/15th of the money back into your RRSP account, otherwise that 1/15th will be included as income for your 2017 taxes.  The idea is that it would be equivalent to taking money out of your RRSP for any other reason, so it is fully taxable at that point.  If at all possible you want to avoid this.  As a rule of thumb, I recommend getting that money paid back to your RRSP as quickly as possible so that it can gain compounding returns for you going forward, and so that you don’t have to worry about the logistical paperwork any longer.  The 1/15th amount in our hypothetical case is $1,667.

In order for you to let the CRA know that you have been good and made repayments back into your RRSP, you will have to fill out another form for the CRA (Schedule 7).  Unfortunately, these repayments are NOT tax deductible because you already got your tax refund cheque back when you were saving for the down payment.

IMPORTANT REMINDER:

Remember that you cannot withdraw from your RRSP any contributions that you have made within 90 days of the withdrawal or else you will get DINGED. This happened to a friend of mine, and she was not a happy camper.

Also, some investments that you can put into an RRSP such as certain types of mutual funds don’t allow you to take money out for a period of time.  Don’t let your adviser talk you into this sort of product!  In fact, ditch the adviser all together, read through this site, and then invest your housing down payment money in something really safe such as a high-interest savings account that will be there waiting for you in a couple years when you’re ready to buy your home.  Here are some great Canadian online banking optionsthat will give you a solid interest rate.

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PROS of Using the Home Buyers Plan

  • It’s money that has been tax sheltered and you can take advantage of the growth in your RRSP.
  • You don’t have to start paying it back until about a year-and-a-half after you buy your home
  • If you plan on going back to school, or if your net income somehow gets lower in any calendar year (e.g. you started up a business and have tons of deductions), you don’t have to pay the 1/15 owed back and instead, can just leave it as income for that year.  You will have low(er) income that year anyway, so you don’t have to worry about paying too much tax (if any) on that income.
  • There is no maximum pay back.  You could pay back the full $25,000 that you took out if you wanted to at any point.
  • It’s an interest-free loan to yourself over a 15-year period basically.

CONS of Using the Home Buyers Plan

  • It’s more debt… debt to your own RRSP (interest free).
  • Lost opportunity cost of compounding investments over the next 15 years (unless you pay it back right away).
  • If you have lost more than your marginal rate in your RRSP portfolio (e.g. you got $3,200 back from the government for your RRSP contribution, but your portfolio is down $5000 from the market), then you are essentially selling for a loss of $1800 and not really gaining any benefit from tapping into your RRSP.  You don’t have to worry about any of this if you keep your investments simple with basic high-interest savings accounts or GICs.
  • There’s a small window of opportunity to take advantage of it (namely within 30 days after possession date).
Home Buyers Plan

102 Comments

  1. Sustainable PF on December 20, 2010 at 8:04 am

    Very thorough. I used this plan on my first home purchase and keep paying it back year after year.



  2. Echo on December 20, 2010 at 8:33 am

    I bought a house before I started contributing to my RRSP (houses were cheap then, like $120k) so I never took advantage of this program.

    Did you consciously choose different investments in your RRSP knowing that your time horizon was shorter and you’d need the money? At what point did you decide you were going to use this program?



  3. anon on December 20, 2010 at 10:39 am

    Another plus is the psychological element. I used it and am very happy that I did. I saved a ton of money on interest to the bank. Since I only had a small mortgage I felt I could pay it off quickly and worked really hard to do that, plunking down extra money at each year end and paying off the bank in 4 years. Then I took another 3 years and paid back my RRSP (so total 7 years for the RRSP). If I’d been facing a bigger mortgage with the bank, perhaps I’d have been less motivated because such a large figure would have felt discouraging. The smaller chunk made it look easier.



  4. eemusings on December 20, 2010 at 1:40 pm

    NZ recently introduced a retirement savings scheme, which also has a provision for withdrawal for first home buying. You can also get up to $5000 for the govt to go towards your purchase.

    I probably will do that, but I won’t withdraw everything. Also, there aren’t any tax benefits that I know of (contributions are taken out of pay post tax, boo!) Sadly, I doubt I’ll have a significant amount in there by the time I’m ready anyway.



  5. BeatingTheIndex on December 20, 2010 at 3:23 pm

    I did not use the plan mainly because I didn’t have much in RRSP since I had just started my career.

    On the other hand, I am happy I don’t have to worry after a significant sum that has to be repaid on a yearly basis. I hate debt!



  6. Taylor on December 20, 2010 at 4:45 pm

    I plan to use the HBP for my first home purchase but I’ll have to look into some specific details at the time I make the final decision.

    Thanks for the post!



  7. JohnG Bank Rates on December 20, 2010 at 5:02 pm

    I’m excited to hear plans like this exist! I’m fresh out of college and I absolutely hate paying rent…I feel like I’m just throwing my money away. I really want to be investing in something that will have a long term value to me, like a home. I’ll need to research this further, but thank you for the introduction!



  8. young on December 20, 2010 at 8:59 pm

    @Echo- So jealous- I wish houses were $120K. Those were the good ol’ days. You can’t even get anything for under $220K in Vancouver now- unless it’s 60 W. Cordova…

    Hm I was very wishy washy about whether or not I was going to use this program. I didn’t want to lose the compounded interest that I had built up (which in the scheme of things wasn’t very much). No, the investments I chose in my RRSP weren’t exactly “principle protected”.. I had gotten emerging market mutual funds (BRIC) which ended up doing quite well. I also have it in a TD eseries which includes more fixed income investments.

    I didn’t actually take all of my RRSP out. I’m in the process of taking my e-series RRSP out but I am finding out that it is more difficult than it looks (more e-series headache..! Not only is it hard to BUY the e-series. it’s hard to take money out when its an RRSP).



  9. young on December 20, 2010 at 8:54 pm

    @Sustainable PF- Are you doing the minimum 1/15 of the amount, or are you hacking away at it at a greater amount?



  10. young on December 20, 2010 at 9:00 pm

    @anon- Thanks for sharing! Yeah, the RRSP doesn’t seem like such a big chunk to me compared to the mortgage, but it’s still a chunk! Paying off your RRSP self-loan in 7 years is great!



  11. young on December 20, 2010 at 9:06 pm

    @eemusings- Thanks for letting us know- it’s always interesting to know what goes on in other countries. So how much do you have to contribute to get the $5000 from the government towards your purchase? Hey you never know, eemusings- each little bit counts!



  12. young on December 20, 2010 at 10:27 pm

    @BeatingTheIndex- I hate debt too! That was one of the things that I didn’t like about the HBP- it’s like debt to myself! Ugh! But it’s not very much, so that’s good.



  13. young on December 20, 2010 at 10:27 pm

    @Taylor- Yeah, I had thought I was going to take the entire thing out, but I ended not doing so because of so many nit picky details. it’s easier to take it out of ONE RRSP account (not 3 LOL).



  14. DoNotWait on December 21, 2010 at 8:09 am

    Nice post Young!! I like this “plan” as long as the buyer understands that paying back RRSP is necessary. Having a home is good, but planning RRSP is also a must. You have to make sure you’ll be able to pay it back AND even put more in it since you’ve lost a couple of years in savings… But it is interesting to save interests. And, it is your money after all!



  15. The Passive Income Earner on December 21, 2010 at 6:42 am

    I used it and I am paying back 1/15 every year. 20K was the max 8 years ago. Don’t pay more – take the 15 years. This is a loan that you should drag as long as possible. Anything you decide to pay more doesn’t give anything on your tax return. I put nearly 10K in my RRSP a year now and I only put the minimum to maximize my tax return. Regardless of how much you assign to your HBP plan, it all goes into your RRSP account and should start working for you. So the minimum is enough to maximize your tax return.

    I would say that the RRSP investment with a target to use for Home Buyer Plans are the least thought of … If you consider most people have mutual funds with possibly back end fees. Withdrawing them just after 5 years will cost them.



  16. young on December 21, 2010 at 8:24 pm

    @DoNotWait- Yup! Can’t let the RRSP savings get put to the back burner. So much stuff to save for- RRSP, RESP, TFSA, down payment, wedding, investment properties.. vacations.. the list is endless! 🙁



  17. young on December 21, 2010 at 8:26 pm

    @The Passive Income Earner- Good to hear you used the HBP too (my fellow Vancouverite). Yeah, I’m going to drag this baby as long as possible (unless my income drops, then it will make more sense to pay off more of it then). Yeah, that’s why its a good idea not to take the whole kitten caboodle out, right? If you leave a few hundred (or whatever minimum it is) in the RRSP account, you won’t be dinged with as much fees, I would think.



  18. twentysomethingmoney on December 23, 2010 at 3:28 pm

    My entire plan for buying a home, has been based around the Home Buyer’s plan. I’ve been really focused on maxing out my RSP’s each year, to get the 25k, as well as building up a bit more, so I can still keep it compounding… So far its working out really well, just need to find a home to buy soon.

    I’m finding now that I’ve met the 25k home buyer amount in my RSP, I’ve switched to focusing on maxing out my TSFA as more ‘disposable’ money for my down payment, so I can earn money (in the stock market), without getting dinged, rather than just having it sit in a savings account.



  19. young on December 24, 2010 at 8:51 am

    @twentysomethingmoney- Yeah, that’s how I felt too. I initially didn’t want to use the TFSA but found that it was so much more easy to take money out from the TFSA than the RRSP (don’t have to send in a home buyer’s plan or meet the conditional time frame that its approved in).



  20. Cassie on December 31, 2010 at 11:32 pm

    I saved money in my RRSP quite aggressively while I was getting a great employer match (4% automatic, 6% matching), then used $15,000 as a downpayment on a home last year. I’ll probably do the 1/15 payments while I work on paying off some “stupid debt”. Once I’ve got that paid off I’ll probably take care of it over the course of a year or so.

    Congratulations on the home purchase 🙂



  21. young on January 2, 2011 at 12:15 am

    @Cassie- Wow, that sounds amazing- your employer matching the RRSP. Yeah, I like the idea of stretching it over 15 years, it’s not very much if you think about it. And if you have lower income for one year (e.g. taking maternity leave/ mature student or something) then you can just not pay that year and it’ll just get added to income.



  22. Investing Smart on January 14, 2011 at 4:21 pm

    Hello fellow blogger! I’m new to blogs but I just wanted to say that I like your blog here on Canadian Rental Properties How To Invest. It kept me reading all the way to the end… And then I went and searched for some more posts after that. 🙂 Keep up the good work, I’m always looking to learn more about Investing Smart, in particular.



  23. Sam on October 25, 2011 at 2:46 pm

    Hi everyone, got a question… My company offers a matching RRSP program for up to 5%.. I have already saved up enough for a down deposit for my first home (with HBP) ~20%…Question is, is it worthwhile to continue renting for another year and contribute more for the matching rrsp or just buy in the close future?



  24. young on October 25, 2011 at 5:40 pm

    @Sam- If you don’t mind me asking, how much do you have for the downpayment? You are allowed up to $25,000. And are you profitable in your RRSP? (given the markets these days, it’s a good question to ask). Secondly, the real estate market is really highly priced right now.. are you willing to take a chance that it won’t go down next year?



  25. Vern on November 23, 2011 at 6:03 am

    Has anyone used an RRSP loan to boost the RRSP accounts before using the HBP? My wife and I are close to having what we need for a downpayment in our RRSPs abd I’d like to use a RRSP loan to max out our accounts at $25,000 each. When we withdraw under the HBP we’ll pay off the RRSP loan and reap the benefit of a nice tax refund (which will help for first time homebuyers). What I need help with is the order in which to do the process. Should I move the loan money into the RRSP accounts before getting a mortgage preapproval or afterwards? I know the contribution most be in there for 90 days but what if we find a house before the 90 days? Any help is really appreciated



  26. young on November 23, 2011 at 7:44 pm

    @Vern- The mortgage preapproval isn’t related to the HBP, you can tell them you are planning to use the HBP but until you actually buy the house/ transfer the money you won’t be needing the HBP (well, in my experience anyways).

    According to the CRA:
    “You have to buy or build the qualifying home for yourself, for a related person with a disability, or to help a related person with a disability buy or build a qualifying home before October 1 of the year after the year of the withdrawal”

    So you can use the RRSP loan, wait 90 days, withdraw the money in 2012, and then buy the house. But this has to be done before Oct 1 next year (if you are buying before Oct 1 next year).

    Hope that makes sense 🙂

    Then you will repay the RRSP HBP in 2014 provided that you bought the home in 2012.

    But you will have an loan to pay off for borrowing money for the RRSP.



  27. Dustin on February 16, 2012 at 5:18 pm

    My employer pays into my rrsp monthly and I recently bought a home last year. Does my employer contribution count toward as repayment toward money I used out of my rrsp to purchase the home?



  28. Veronica on April 15, 2012 at 7:18 pm

    The CRA only requires you to be a Canadian resident. For this purpose, the notion of “residency” in the Income Tax Act applies. You are a resident if you spend more than 183 days in a calendar year in Canada.

    So, this has some consequences: you may not qualify even if you are a Canadian citizen (for instance, you live abroad).

    On the other hand, permanent residents and individuals who are residents in Canada (such as international students, temporary visas) qualify for the plan.

    Please refer to www.cra-arc.gc.ca/E/pub…35-11e.pdf at page 8.



  29. jamie on April 27, 2013 at 1:48 am

    quick scenario question.

    i have agreed to buy a home. it was listed as an immediate possession and sits empty. i have a large dollar amount in my RRSP that will not hit 90 days until June 19th, 2013. it is now April 27th 2013. so i have to wait 60 days for possession.

    or do i….?

    if my bank was willing to provide me with a loan to act as the down payment and i move my possession date from June 28th to May 28th, couldn’t i repay the loan on June 19th with the money from my HBP-RRSP and therefore be in my new home a month earlier?



  30. Teacher Man on April 27, 2013 at 10:25 am

    To be honest Jamie this is a very technical question and the potential for a pretty negative tax hit exists if this is implemented properly. I would get ahold of someone at the CRA that specializes in the specifics of applying the HBP.



  31. […] owe about $16,000 $12000 to myself in my RRSP because I used the Home Buyers Plan for my down payment. I allocated about $4500 into my home buyers plan for […]



  32. matt on November 13, 2013 at 12:15 pm

    Here is my scenario and I would appreciate advice. We plan on buying a home in 2 years and are in the process of saving a deposit. My work matches 40% of my RRSP contributions, so I was thinking of boosting my RRSP contributions instead of just saving in a savings account for the next 2 years as it’s an instant 40% gain on the money. I know I can’t use the employer portion for the HBP but I don’t mind having extra RRSP money saved.

    I’m worried that I am overlooking something obvious that makes this a bad plan… Also when we apply for a mortgage does the RRSP HBP money hold the same power as regular cash savings?



  33. Kyle on November 13, 2013 at 9:04 pm

    Hi Matt,

    I think it’s a sound plan overall. Getting that employer match is so key in the long run.

    In terms of applying for the mortgage and RRSP money being like cash, that I’m not sure about. It would likely depend on the rest of your finances and the lender to some degree. On the one your down payment with the RRSP money will be all up front and act exactly as cash. On the other hand, you now have to pay that back over the next 10 years so that will affect your cash flow. Consequently, depending on everything else some lenders might be worried about that. I’d ask Rob McLister or another mortgage expert about that one.



  34. J on November 14, 2013 at 8:12 am

    It’s 15 years to repay on the hbp, not 10. And I just moved into my first purchased home in June 2013, all I had to bring to the bank was proof of my rrsp balance. It was as good as cash in a savings account, as I had none of that. Do make a note however that your rrsp balance can only be pulled out under the hbp if it’s been in your rrsp account for minimum 90 days(might be 89 days). What you need to do though is contact your rrsp provider and varify that you are able to withdrawal under the hbp. Some rrsp’s are locked in and cannot be used for the hbp.



  35. J on November 14, 2013 at 8:18 am

    I should also point out that I went through a mainstream bank for my mortgage(that I was not a member of). I did not go to a high-risk “we’ll give a mortgage to anyone!” establishment.



  36. Cayla on November 28, 2013 at 1:40 pm

    I am curious about one thing. My boyfriend just bought his first house. We decided that in a year we would like to buy another house together. He did not use any RRSPs for his house. I however would like to use mine when the time comes and a friend of mine said I wont be able to if I choose to buy with him because he is no longer a first time home buyer, only I am. Does anybody know if I would still be able to use my RRSPs for a house we would buy together?

    Thanks!



  37. Kyle on November 28, 2013 at 2:23 pm

    Sorry Cayla, if you live in that house with your boyfriend it would disqualify you from using the HBP. If you live separately, do not buy this house with him, and then purchase the next house completely on your own, then I think you would be in the clear. That’s the only scenario that this would work though.



  38. Milli on January 31, 2014 at 1:19 pm

    If you have an RSP, but you haven’t had it long enough (about 3 years) to have accumulated $25,000 can you still use it for the HBP?



  39. Kyle on February 1, 2014 at 9:49 am

    Yes, you definitely can Milli. $25K is just a maximum.



  40. […] paid back the Home Buyers Plan for my down payment in […]



  41. Ashley on August 12, 2014 at 6:55 pm

    Can you buy a house with the HBP and rent it out after you have lived in it? Or rent it out for a couple months and then move into to after those couple months ?



  42. Kyle on August 12, 2014 at 7:51 pm

    I don’t see why not Ashley. Can’t say I’ve ever known someone that did though.

    Scratch that Ashley. I did some research on it and you are not able to rent it. I would assume the powers that be would see it on your tax return right?



  43. Tax fraud on November 5, 2014 at 1:52 pm

    “You don



  44. CJ on November 21, 2014 at 12:55 am

    Hi I have an odd question relating to the Home Buyers Plan.

    My wife and I are looking at buying our first house. We have approx. 25K each in TFSA’s and we each have an RRSP account with very little in it.

    We talked to a broker at TD and he mentioned the Home Buyers Plan and how it could get us $10,000. He wasn’t very clear about where this money was coming from, which is why I decided to look it up – and that led me here.

    Now my wife and I are debating each moving the money from our TFSA over to an RRSP (and waiting 90 days before purchasing a home) but I’m still not quite sure how this all works and I have a few questions.

    Firstly – We arrived home from Australia early April, so our yearly income from 2014 will be significantly lower than that from 2015. Does it matter when we transfer our money into an RRSP (end of 2014 or March 2015)?

    From what I understand we get to choose the year that we use our RRSP contributions. If we chose to use them for our 2015 tax return than we would get that money at the end of the tax season which would be April 2016? And also if we chose to use them for our 2014 tax return we would be getting significantly less (since our annual income was much lower). Do we even have a choice what year to use them if we are using the Home Buyers Plan?

    I think I am slightly confused how the RRSP works in relation to the Home Buyers Plan. – When and how do we get that extra money?

    It seems that the HBP is moreso meant for people who have a large chunck of their money already put away into RRSPs. It seems silly for us to move the majority of our money from a TFSA into an RRSP and have to wait 90 days – but if it gets us an “interest free loan” for 15 years then it does seem worth it to me as we will likely be needing more money now (put a larger down payment, save a ton of money on mortgage payments over 25 years, not to mention extra money to furnish our new home).

    ARGH, sorry for the wall of text but this is all confusing me. Any insight would be great. Thanks!

    CJ



  45. Kyle on November 21, 2014 at 6:33 pm

    Hey CJ, that is an interesting quandary. Here is my first solution – request a better broker from TD (one that can explain what he is talking about). That’s what you’re paying him for right? I assume the the mythical 10K in “found money” that he is referring to is the fact that if you transfer that 25K you have into an RRSP it might generate a 10K tax return depending on what your marginal tax rate was in 2014. I’m not sure how that tax situation works to be honest as far as what year you would claim the contribution in, you’ll have to ask an accountant about that. Hypothetically what you could do is take your 25K put it in the RRSP, wait a few months, use that money as the HBP, then take the tax return and add it your downpayment/furnishing your new home.



  46. Heidi on November 22, 2014 at 7:35 pm

    Hi there,
    I’m wondering where the money goes that we have repaid on our HBC. My husband and I have almost finished paying it back but we have never received any separate paperwork from the bank or the government regarding where the funds are. Also, are we allowed to make a withdraw from the funds we have repaid in order to pay down some unwanted debt?
    Thanks in advance.



  47. Kyle on November 24, 2014 at 12:09 pm

    Hi Heidi. The short answer is that you need to talk to your RRSP account manager at your banking institution. The money you’re repaying should be going right back into your RRSP and if you’re not choosing investments for it someone is either investing it on your behalf (probably not) or it’s just sitting there in cash. I’m not sure on the specifics, but I’m fairly certain that you could withdraw the funds when they are all paid back, but it’s not recommended. You’ll take a significant tax hit on them if you take them out early, so unless that debt is at a relatively high interest rate I’d considering leaving the RRSPs alone.



  48. Susan on January 16, 2015 at 7:44 am

    Actually it isn’t tax fraud. In the Home Buyer’s Plan publication on the CRA webstie (www.cra-arc.gc.ca/E/pub…P459_51058) under Chapter 3: Other Rules you should know.

    I quote,
    “Use of funds withdrawn for other purposes

    As long as you buy or build a qualifying home, and you meet all the applicable conditions to participate in the HBP, you can use the funds you withdrew under the HBP for any purpose.”

    On another unrelated matter, this article is pretty spot on except for one of the eligibility requirements. You don’t have to be a Canadian citizen, you have to be a Canadian resident (holding a Permanent Resident (PR) status)



  49. Kyle on January 19, 2015 at 5:59 pm

    Thanks for the update Susan!



  50. Dan on April 5, 2015 at 10:32 pm

    Fantastic article. I was hoping someone could help answer a question…My wife and I are planning on using our combined RSP ($25,000 each) for the HBP, however we just put the money in the account April 1st, 2015. We found a place we love and it has a 90 day possession on it because there are renters in it (Alberta rule). Would we be able to use the $50,000 we put in April 1st, 2015 under the HBP, if the possession date is not for another 90 days?



  51. Kyle on April 14, 2015 at 5:39 pm

    I don’t think so Dan. Maybe you could make a handshake deal with the seller to buy the house when your 90 days are up?



  52. Alan on April 23, 2015 at 10:00 pm

    One thing should be clarified here, you have to be a Canadian Resident, not necessarily a Canadian Citizen to take advantage of the HBP. (Gooooo PR’s)



  53. Kyle on April 25, 2015 at 9:48 am

    Correct! Good point Alan.



  54. Andrew on July 3, 2015 at 6:25 pm

    Hey guys,

    Hoping you can help me.

    I currently have $25k with Investors Group in an RRSP. I want to consolidate my banking and would like to move this to my main bank CIBC.
    My girlfriend and I bought a new house build that is closing on August 21st (today is July 3). I plan to use my $25k RRSP as part of HBP.

    Question #1 – Timing should be ok? I have a month and a half….
    Question #2 – I know the RRSP contribution needs to be in the account 90 days prior to the withdrawal from HBP….does a transfer (in kind) within 90 days to another account/institution count??? ie. Should I just leave them with Investors Group and withdraw them there, then close account and open one at CIBC?

    Thanks in advance. Love this site!



  55. Kyle on July 5, 2015 at 9:52 pm

    Whoa… this is pretty detailed Andrew. I looked around and couldn’t find anything definitive on it for you. With a complicated situation like this one I would directly contact the CRA and speak to an expert on the HBP because of the added complexity. Also, you might want to google “Investors Group Review” and then see what we’ve written on this site before…



  56. jonah on November 9, 2015 at 10:22 pm

    So funny to read of home prices of $200K in Vancouver. Have they really risen to in excess of $1M in 5 yrs??



  57. Matt on December 16, 2015 at 5:36 pm

    What happens if I don’t pay it back; can they really track it?

    Thanks
    Matt



  58. Kyle on December 18, 2015 at 5:03 pm

    Yes.



  59. Bill on January 30, 2016 at 9:28 am

    Hi Kyle,

    I have a quick question I’m hoping an expert can clarify regarding HBP repayment.

    If one leaves the country and becomes non-resident (as I plan to in March), you can either repay your balance via RRSP within 60 days, or declare the owing balance as income on line 129 of your final tax return.

    If I understand correctly, it would be advantageous for me to do the latter. So when I file my final Canadian tax return next year, I’ll have two months of employment income, then claim the balance (~10k) as RRSP income. At that point CRA and I are square.

    Is that interpretation correct?

    Thanks!

    Bill



  60. Kyle on January 30, 2016 at 6:11 pm

    That is how I would interpret it Bill. I would still try to contact the CRA just to be safe though. Good luck!



  61. Rizwan on February 17, 2016 at 1:16 pm

    I have invested in RRSP. Can i only withdraw the contributed portion or the investment gain as well before 90 days.



  62. Kyle on February 18, 2016 at 8:47 am

    Before 90 days? It has to be at least 90 days from my understanding.



  63. Michelle E on February 22, 2016 at 12:34 pm

    Hi CJ – I doubt you’re going to see this, but just in case. I have the exact same question as you – is it worth it to transfer money from my TFSA to an RRSP to get that rebate and how does it work with claiming the deductions. Did you ever get an answer on that? Please let me know as I can’t find an answer to this question anywhere!



  64. Bruno on February 28, 2016 at 11:42 am

    Hi Everyone – I am in a terrible predicament. While I take full responsibility for my issue I will preface it by saying I was the victim of very poor financial advice and also some declining health.

    With this said, it appears that I did not accurately report/repay my HPB over the last couple of years. It’s a long convoluted story. So rather than bore you with the details I want to get right the point and ask what I am fearing is the worst possible situation:

    If I failed to repay my HPB what are the implications? Am I facing jail time? I failed to pay as a direct result of some misinformation I was provided. I owe about $15000 and do have the means to repay it now and easily so but how much penalty can I expect to pay back?

    I am out of work and have been for several years. My wife is keeping things together and we are surviving on her income.

    I could dip into a savings account and deplete it entirely to pay back my obligations to the CRA but am worried about facing jail time or facing heavy penalties which would crush us financially.

    Your help would be very much appreciated. Please no personal attacks. God knows I’ve been kicking myself in the head for weeks for my naivety and total ignorance over this matter.

    Thanks



  65. Kyle on February 28, 2016 at 12:33 pm

    Hello Bruno. You should definitely contact the CRA immediately. I am no expert, but I would say there is 0% chance of jail time. To be honest, I think the most probably outcome is that you will simply have to report the income for each of the years you’ve paid it. From everything I’ve read, whatever your HBP payment was supposed to be, it will be counted as annual income (since it no longer receives the HBP benefit). I would call the CRA and describe exactly what happened. My best guess is that you will owe some money in back taxes.



  66. Bruno on February 29, 2016 at 1:34 pm

    Thanks Kyle. I’ve been killing myself over this matter for the last little while but after reading your response and talking to others it seems that you are correct. I will be looking at paying back taxes and maybe some penalties. I have always conducted myself with the utmost integrity and I am not going to stop now. Lesson learned though. I am never putting my trust and confidence in someone else without doing extensive research beforehand. Thanks again!



  67. Kyle on March 1, 2016 at 11:03 am

    Overall, you probably learned this lesson quite a lot cheaper than many others have Bruno. Good luck going forward!



  68. Ben on June 16, 2016 at 1:37 pm

    Hi Kyle,

    First off, really big fan of your site. I have learned so many valuable things from it already and visit it regularly since recently finding it.

    Now, I’ve been advised by someone at TD that the money withdrawn from an RRSP for the HBP can only be used towards the down payment and must be paid back over 15 years but with no specific minimum amount per year. He also said that repayments are not tracked and therefore are also still tax-deductible. However, from reading this page and comments, it seems these things are largely inaccurate.

    It seems that:
    a) as long as qualifying conditions are met, you can use the money for other things such as renovations or furnishing;
    b) minimum of 1/15 of amount withdrawn must be paid back per year (in order to not be counted as additional income); and
    c) repayments to the HBP are tracked and are not tax-deductible.

    Do I have this right? And how does a) work in terms of withdrawing the money, is it transferred to my chequing account first (for example) and then I would pay the down payment from my chequing account? And how does c) work, when you contribute to your RRSP in years following, do you identify what amount is to pay back the HBP and what amount is separate from this?

    Thanks in advance.



  69. Kyle on June 18, 2016 at 10:06 am

    Thanks for the encouragement Ben! Unfortunately either your advisor isn’t very good at communicating or is quite wrong. There is definitely a minimum amount per year and repayments are not tax deductible – you’re essentially just paying yourself back on the loan you gave. You got the tax deduction when you initially made the contributions. As far as I’m aware, you can use HBP for renovations as long as you meet all of the other regulations. As far as the logistics of it, I’d talk to a real estate lawyer and/or an accountant on that one just to make sure it was done was done in the easiest way possible as far as record-keeping for the CRA.



  70. Ahsan on July 16, 2016 at 2:05 pm

    Hi,I have a question regarding RRSP withdrawal that I did house buying deal on July 11th but my home possession is on Oct 28th.Can I withdraw money in October tax free because it is more than 30 days (from July 11th).Can you please help answer?



  71. Kyle on July 17, 2016 at 11:09 pm

    Best to contact the CRA about this specific situation Ahsan.



  72. Robert on November 24, 2016 at 8:57 am

    Hey thanks for posting this article. One thing though, there is one item you should revise as it is not accurate. This article says you must be a Canadian citizen to participate but actually you only need to be a Canadian resident to participate as per the information on the CRA’s website. There is even information there about what happens if you are no longer a resident while in the process of repaying the funds. Please update as this article scared the hell out of me because I suddenly though I could not use the funds in my RRSP because I am a permanent resident and not a citizen. Thanks.



  73. TJ on January 9, 2017 at 2:27 pm

    Hello,

    I have a question about the HBP. Scenario: I’ve contributed $20,000 to the RRSP and through investing have a market value of $25,000. I sold the investment in the RRSP and my RRSP cash value is the $25,000. Would I be able to use the $25,000 for HBP or is it only funds that I’ve contributed ($20,000)?

    If I am able to use the $25,000, do I have to wait the 90 days of when I sold my investments in the RRSP or is the 90-day wait period on the contribution dates?

    Thanks,

    TJ



  74. Kyle on January 9, 2017 at 6:53 pm

    You are definitely able to use all $25,000 TJ, and it’s 90 days from the contribution date from everything I’ve heard.



  75. TJ on January 13, 2017 at 12:17 pm

    Hello again,

    Using the RRSP under HBP I will have my 5% down payment as required for the mortgage. However, after speaking with a real estate agent, I am informed that it strongly recommended that around 5% of the purchase price of the home be placed on “deposit” when an offer is submitted/accepted. My understanding is that the deposit would be lost if I walked away from the deal. When the deal is completed, the deposit amount is placed on the mortgage which turns into a down payment. This “deposit” amount… can it be from the HBP RRSP or is the deposit separate money from the HBP RRSP down payment?

    My understanding is that I may need to come up with a deposit separate from my HBP down payment? If so, can the deposit come from an unsecured line of credit?

    Thanks,

    TJ



  76. Kyle on January 17, 2017 at 9:30 am

    As far as I’m aware TJ that deposit amount should be able to come from your RRSP. I know that initial 5% is not supposed to be borrowed – however a lot of brokers will look the other way on that. All of that being said, I think you’d be in better shape not having to make mortgage payments plus pay down an unsecured LOC you’ll be getting hit with a high-interest rate on. Are you really sure you want to purchase a house right now TJ? Sounds like you could use a little more time to build up a nest egg and wait for the market to cool off?



  77. TJ on January 17, 2017 at 10:03 am

    Thanks for the reply, Kyle. You are right, time to save – it will be interesting to see what the future holds for this Vancouver housing market. I have no choice but to wait on the sidelines so that is what I’ll do. Regards, TJ



  78. Maria on January 31, 2017 at 5:00 pm

    Hi Kyle,

    I’ve been reading your blog and it has definitely been very informative! Thanks for putting everything in simple terms for those of us who never took a financial course in school. (But hey, I know what the difference is between a parallelogram vs a rhombus)

    Here goes my scenario/question:

    I took out $25k from my RRSP for my first home 3 years ago and have been paying it back. My question is, what are the pros and cons of paying the entire $25k back immediately rather than dragging out the “loan” for 15 years? I personally hate debt and hate knowing I have this $25k loan (even though it’s to myself, interest free).

    I have no personal debt other than my mortgage (cars paid off, no credit card debt). My husband and I are also planning to have a baby this year, so not having that $1667 payment would be helpful when I have another financial commitment (aka our baby). I realize I can put this chunk of money towards my mortgage as well, but I’d like to be rid of my $25K “debt” first so I can gear future earnings towards paying down the mortgage/supplementing maternity leave.

    Thanks.

    Maria



  79. Kyle on February 2, 2017 at 9:12 am

    Hey Maria, the only real pro/cons when it comes to paying yourself back are basically the same pro/cons for investing in your RRSP at any point. If you were to put in the whole amount today it would have that much longer to grow as opposed to a little at a time over the next 12 years. To be honest, if you’re going to be going on mat leave soon, I’m not sure what your income would be, but you might even be ok with just not paying the loan amount back one or two years that you may have a low income – as it would just be added to your taxable income amount with no other penalty.



  80. Maria on February 2, 2017 at 9:23 am

    Thanks Kyle.

    If I’m understanding this right, if I add the $1667 as income during my mat leave, does this mean I don’t have to pay that amount back since it’s added as income? Or is it just deferred and I stretch out the loan for another year?

    My work tops up my pay to a 100% for the first 6 months. In this case my income will definitely go down, but we are using savings to supplement the loss for that year. If I decide to go back to work part time, can I just add the $1667 as income for the duration I’m part time? (Thereby not ever actually “repaying” myself?)



  81. Kyle on February 2, 2017 at 1:23 pm

    That is my understanding Maria – that the $1,667 would count as earned income for that year, just as if you had withdrawn it from your RRSP.



  82. Kirk on February 6, 2017 at 6:35 pm

    Hey @Dustin, like you I am in an employer match RRSP program. My contribution is in pre-tax dollars and they adjust the income tax deduction to account for the RRSP contribution.

    Without HBP, this would result in zero tax owing and zero refund at the end of the year. With HBP, it means I didn’t pay tax on $1333 (1/15 of $20K) of income, and thus have tax owing.

    I make up the difference with a one time contribution in February. Not a huge deal, but something to remember.



  83. Sophia on February 21, 2017 at 10:13 pm

    Hi Kyle,

    I hope you can help me. I’m aware of how the home buyers program works but have a question with regards to timeline. My boyfriend and I purchased a new build condo this month (feb 2017) we have paid our first 5% deposit. We have 3 more deposits. The last deposit is due on closing proposed April 2018) the third deposit is due in 1 year (feb 2018) My boyfriend and I want to both contribute $15,000 to our RRSPs, but we cannot put them both towards the last deposit as $30,000 is more than the deposit. Can I take my $15,000 out in Feb 2018 for a payment of a deposit and my bf take his $15,000 out in April 2018 or whenever the condo closes? Obviously we can’t be sure it will close in April but I hope it will close that year. Just trying to figure out if their is a timeline to acquire the home from the date of withdrawal of the money or if a contract with said schedule is sufficient.



  84. Kyle on February 25, 2017 at 1:44 pm

    I believe your proposed timeline would work Sophia, but I’ve never dealt first hand with this type of situation before. Best to ask the CRA directly (I wouldn’t just go with what my real estate agent says).



  85. Sita on March 1, 2017 at 3:04 am

    I hope you can help me:
    I am renting in Vancouver and bought a condo in July 2016 in Surrey, BC with loan from RRSP under HBP. Since July 2016, I rented my condo for one year. Now I don’t wish to move to my own place and I want to rent it out. By doing this, I have come to know that I will not fulfil the condition of principal residence under HBP. My question is, can I cancel the HBP and deposit the amount borrowed. Is there any penalty. What will the last date to deposit the borrowed amount in order that it should not become my income. Thanks.



  86. Kyle on March 5, 2017 at 9:59 am

    You’ll definitely have to pay the money back Sita, but I’m not sure what the penalty will be or the deadlines. When you’re getting that specific with information it’s always best to contact the CRA directly.



  87. Idrish on March 6, 2017 at 8:25 pm

    I bought the house using HBP. I came back in apartment after a month due to some family issues and rented the house. What are the consequences ?
    Thank you

    Idrish



  88. Kyle on March 6, 2017 at 10:11 pm

    Pretty sure that’s going to be considered an illegal use of the HBP and you’ll be hit with a penalty Idrish.



  89. Nancy on March 13, 2017 at 8:22 am

    Great article.
    You indicated a repayment of the HBP the year following withdrawal…..you are actually given an additional year grace with repayment starting 2 calendar years later. ie. withdrawal in 2012, start to repay 2014.



  90. Kyle on March 15, 2017 at 9:44 am

    Thanks Nancy!



  91. hemjal on March 30, 2017 at 2:02 pm

    Hey Kyle

    Thanks for this wonderful clarification on the RRSP. it is really helpful.

    Needed to understand the 30 days window better. You mentioned that it should be 30 days from possession. does that refer to after closing of the house is done and I moved to the house? or is it considered 30 days from when I signed POA?

    Here is scenario

    I bought a house on 25th March with closing date of 26th may or may be couple of days later.

    I have my RRSP done on Feb 28th, according to 90 day rule I will be only qualified on or after 28th May. And my closing / possession of house is on 26th may

    Can I withdraw my RRSP amount or after 28th May?



  92. Kyle on April 1, 2017 at 11:36 am

    From everything I’ve read, May 28th would be the first you can use it Hemjal.



  93. Heather on April 13, 2017 at 3:27 pm

    Is it better to pay back the minimum requirement of the HBP, or should I make larger payments and pay it back quicker?



  94. Kyle on April 17, 2017 at 2:07 pm

    It’s really just your own money that you’re paying back to yourself Heather – so only you as the lender can answer that!



  95. Dev on September 24, 2017 at 12:01 am

    Part 1 of 2

    Hi all,

    First time poster here, just found this website and I am enjoying reading through the articles and discussions. Thank you Kyle and Justin.

    I have a question that relates to “CJ’s” post much earlier in terms of “last minute” so to speak RRSP contributions.

    I am looking at buying my first home. Over the years I have always made sure to max out my TFSA contributions but unfortunately, due to some poor advice (and lack of research/understanding on my part as well) I have not contributed ANYTHING to my RRSPs.

    At this time I have more than enough savings and other investments to put $25k into my RRSP (immediately) to take advantage of the HBP.

    My timeline is obviously over 90 days until buying a home…

    1. Would dumping $25k into an RRSP, right now, all at once be worth it?

    2. If I wanted to withdraw all $25k under the HBP would I have to declare all $25k in RRSP contributions come tax time or am I able to carry forward any unused contributions that don’t benefit me based on this years income?



  96. Dev on September 24, 2017 at 12:02 am

    Part 2 of 2

    3. If I have to declare all $25k in respect to question 2. above, would it be smarter for me to only contribute an amount I need to bring me into the lower tax bracket come tax time?

    4. Note: I’m not totally sure if I correctly understand how I would be affected at tax time. I get that any RRSP contributions are deducted off your annual income for that year. But is it worth it to contribute more into an RRSP if you are already in the lowest tax bracket?

    I am not a high earner and my annual salary is say $55k/yr for this example.

    I sincerely apologize for all the questions and thank you to anyone who helps in advance.

    Much appreciated,
    Dev



  97. Kyle on September 24, 2017 at 6:39 pm

    You may want to contact a real estate lawyer that is super confident in their answer here Dev, but to the best of my knowledge, you would absolutely have to declare the contributions come tax time (and why wouldn’t you? Isn’t that the whole point of using your RRSP – to get access to the tax deferment provided by your tax return?). In order to answer #1, the real question is do you need the tax deferment of the RRSP to supercharge your downpayment savings? It sounds as if you have a solid chunk ready to go now. Perhaps if you’re not in a super high marginal tax rate it makes sense to save the contribution room? I wouldn’t be in a rush to get into this housing market!



  98. Kyle on September 24, 2017 at 6:43 pm

    No need to apologize for questions Dev! That’s what this sort of site is about right? It’s hard to answer “if something is worth it”. Instead, all I can do is show the benefits. At 55K you’re probably better off saving the contribution room (check out our TFSA vs RRSP article), but if you really really want the tax return (see this updated tax table: agtax.ca/cra/2…x-brackets) then maybe it’s “worth it” to you at this time. You would be using RRSP contribution room to get back a fairly minor amount of tax money however. The boost to your housing down payment savings will be fairly minor, but maybe that’s an ultra-high priority to you right now for some reason? Like I said, I wouldn’t advise anyone to rush into the house market right now.



  99. Ray on October 9, 2017 at 9:34 pm

    Great blog..thx.. if you want to rent to own can you use this plan?
    Also, if u don’t need the tax reduction of RRSP contributions, a TFSA might be a great option to save for home purchase.. if you currently rent, probably your mortgage and your payback of HBP would be about the same as what u paid for rent before u buy..just thinking about it..



  100. Kyle on October 12, 2017 at 2:06 pm

    You cannot do rent-to-own with this as far as I know Ray. And you are correct, if you can’t make use of the RRSP tax considerations, you’re better off saving that room and using your TFSA.



  101. Jeremy on November 19, 2017 at 12:28 pm

    Good day, thank you for all of the information. I used the HBP back in June of 2017 to purchase a home. My “intent” was always to turn this into our forever home. More recently I had come across a job offer in another city (5 hour commute) with better overall conditions of pay (still within the same company). The new position would require me to rent an apartment – and eventually I would love to purchase another home and rent the top floor of the house purchased with the HBP. I work 10 of 4 off and travel to this property every second weekend.
    The simple answer would be to contact CRA and advise of the situation. Do you happen to have any insight or experience to share in this scenario?



  102. Kyle on November 21, 2017 at 11:40 am

    I don’t Jeremy – sorry.



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