What is the HBP?
The Home Buyers’ Plan (HBP) allows first-time home buyers to withdraw up to $35,000 from their Registered Retirement Savings Plan (RRSP) tax-free to put toward the purchase of a home.
Key Benefits:
- Tax-Free Withdrawal: Withdraw funds from your RRSP without paying taxes upfront.
- Boosts Your Down Payment: Use HBP funds to increase your initial home purchase contribution.
- Repay Over 15 Years: Flexible repayment plan, with no interest charged.
- Combine with FHSA: Can be used alongside the First Home Savings Account (FHSA) for additional savings.
Who is Eligible?
- Must be a Canadian resident
- Must be a first-time home buyer (haven’t owned a home in the past four years)
- Must have a written agreement to buy or build a home
- The home must be your principal residence within one year of purchase
How Much Can you Withdraw?
- Maximum withdrawal: $35,000 per person
- Couples can withdraw a combined $70,000 if both are eligible
- No withholding tax on withdrawals
Repayment Rules:
- Repay the amount over 15 years in equal annual payments
- Repayments start the second year after your withdrawal
- If you miss a repayment, that year’s amount is added to your taxable income
How it Works:
- Ensure your RRSP funds have been in the account for at least 90 days.
- Submit an HBP withdrawal request to your financial institution.
- Use the funds to purchase or build your home.
- Begin repaying the amount two years later, over a 15-year period.
Example Scenario:
If you withdraw $35,000, your annual repayment would be $2,333 over 15 years. If you skip a payment, that amount is added to your taxable income for the year.
Why Use the HBP?
- Provides interest-free access to your RRSP savings
- Increases your down payment, potentially reducing mortgage insurance costs
- Helps make home ownership more affordable for first-time buyers