What you Need to Know about the Home Buyers’ Plan

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How does the Home Buyers’ Plan work?

Individuals who are interested in the Home Buyers’ Plan can withdraw up to $35,000 against their RRSP without paying any taxes. This will only apply to those who are approved for this program. Here are some things to consider:

• You are deemed eligible if your funds have been in your RRSP account for at least 90 days
• Individuals who want to withdraw their funds will have until October 1st of the year
• All withdrawals are required to be made within one calendar year

Note: As long as individuals have repaid the amount of money that was withdrawn from their RRSP and has met all other eligibility requirements, they may be able to requalify to partake in the HBP again. 

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Who is Eligible for the Home Buyers Plan?

Any Resident of Canada that is considered a first-time home buyer is eligible. Here is a quick summary of what you need to know about your eligibility:

• Within a year of buying or building, the home is to be your principal residence
• Applicants can build or buy a home for a relative with a disability or for themselves but will need a written agreement. 
• Individuals who are not first-time home buyers are eligible to build or buy a home for a relative with a disability
• All types of home including apartments/condominiums, semi-detached, townhouses, single-family, units etc that are located in Canada are considered as qualified homes, with the exception of co-op housing as well.

How to apply to The Home Buyers’ Plan

You can apply for the Home Buyers’ Plan (HBP) by downloading and completing the T1036 form , which is a form requesting to withdraw funds from an RRSP. Please ensure that you fill out Part A of Area 1 in order to determine your eligibility to make the withdrawal from your RRSP under the HBP. Furthermore, give the form to your financial institution who will be responsible for filling out Area 2 and keep a copy of the completed form for your records.

If approved, your RRSP issuer will then deposit the necessary funds into an account of your choosing and provide you with a T4RSP slip. This is a confirmation slip indicating the amount withdrawn from your RRSP and will be used as a supporting document for your tax return for the next following year.

How to repay the Home Buyers’ Plan amount

It is mandatory for any individual who participates in this plan to repay the funds from their RRSP within 15 years back to their account before the yearly RRSP deadline. You can reduce your overall payments by paying back more than you owe however, this will not affect your annual RRSP deduction limits . Be mindful that you have 2 years to pay the first payment after your first withdrawal.

Statement details with information including the amount you’ve paid and the amount you owe will be sent to participants from the CRA.

For reference, here is a quick example of the minimum annual repayments and how it is calculated:

Participants that withdraw $35,000 from their RRSP,  the minimum annual repayments would be $2,333 because you must divide the amount you owe with the length of time you must repay the funds (35,000/15)

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Can you cancel the Home Buyers’ Plan?

No, generally you cannot cancel the HBP; however, there are some exceptions as follows:

• You or your disabled relative failed to buy or build a home by October 1st of the year following the date of your RRSP withdrawal
• You became a non-resident of Canada prior to buying the home

Should you want to cancel the HBP, you are required to make a cancellation payment(s) to your existing RRSPs by December 31st, provide a letter of intent, and complete form RC471 Home Buyers’ Plan (HBP) Cancellation. Cancellation letters must be received by the CRA no later than 60 days from December 31st of the year following the year that you received the funds. If you are unable to include payment receipt(s) for the full amount withdrawn from your RRSP, the remainder will then be considered as taxable income.

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Pros and cons of the Home Buyers’ Plan

Pros

• The HBP serves like an interest-free loan
• The HBP grants access to money that could help you buy your first home

Cons

• Yearly repayments
• Forgo potential tax-sheltered investment/savings growth for a period of time

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Additional help

Some other national first-time home buying programs include:

• The First-Time Home Buyer Incentive helps people across Canada with their down payment by offering a tax-free loan of 5% or 10% of the home’s purchase price 
• The GST/HST New Housing Rebate allows eligible homebuyers a rebate to recover some of the GST or the federal part of the HST paid on a newly built or renovated house.
• The Home Buyers’ Tax Credit allows eligible participants to receive a non-refundable income tax credit of $5,000.