The RRSP Home Buyers Plan (HBP) explained for Canadian First Time Home Buyers

The Home Buyers Plan (HBP) is a Canadian federal government program which helps Canadian residents buy a home for the first time. With the Home Buyers Plan you can take up to $25,000 out of your Registered Retirement Savings Plans (RRSPs) without having to pay taxes on the funds if you are buying your first home. If you buy a home with your spouse or another person you could both withdraw $25,000 under the plan. The plan can also be used to buy a home for a relative who is disabled, although the conditions are slightly different.

Starting two years after your withdrawal, you get 15 years to repay the money to your RRSPs without incurring taxes. If you don't pay back the required amount in any year, then it is considered taxable income for that year. You can pay back at a faster rate if you wish. The repayments do not affect your RRSP contribution limit for a given year.

To be eligible:

• you must be considered a first-time home buyer;

• you must enter into a written agreement to buy or build a 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. Obtaining a pre-approved mortgage does not satisfy this condition;

• you must intend to occupy the qualifying home as your principal place of residence no later than one year after buying or building it. If you buy or build a qualifying home for a related person with a disability, or help a related person with a disability buy or build a qualifying home, you must intend that that person occupy the qualifying home as his or her principal place of residence; and

• in all cases, your repayable HBP balance on January 1 of the year of the withdrawal must be zero.

RRSP withdrawal conditions under the HBP

• You have to be a resident of Canada at the time of the withdrawal.

• You have to receive all withdrawals in the same calendar year.

• You cannot withdraw more than $25,000.

• Only the individual who is entitled to receive payments from the RRSP (the annuitant) can withdraw funds from an RRSP. You can make withdrawals from more than one RRSP as long as you are the annuitant (plan owner) of each RRSP. Your RRSP issuer will not withhold tax on these amounts.

• Generally, you will not be allowed to withdraw funds from a locked-in RRSP or a group RRSP.

• Your RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the HBP, or the contributions may not be deductible for any year.

• If you are withdrawing funds from your RRSPs to help a related person with a disability buy or build a qualifying home, it is the related person with a disability who must have entered into such an agreement.

• Neither you nor your spouse or common-law partner or the related person with a disability that you buy or build the qualifying home for can own the qualifying home more than 30 days before the withdrawal is made.

• 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

• You have to complete Form T1036, Home Buyers' Plan (HBP) Request to Withdraw Funds from an RRSP for each eligible withdrawal. For more information on completing the form, go to Completing Form T1036.