The Home Buyer Plan is a program administered by the Canada Revenue Agency. The program allows you to withdraw invesment funds from your RRSPs to buy, or build, a qualifying home. You can withdraw up to $25,000 from your RRSP in a calendar year to purchase a home for yourself or for a relative who has a disability.
Many Canadians work hard to save their money. Most Canadians save through RRSP investment products as there are income tax advantages to doing so. The benefit to the program is that you don’t have to include the RRSP withdrawals in your income, and your RRSP issuer will not withhold any taxes on the funds you withdraw.
You can choose to withdraw a single amount or make a series of withdrawals throughout the same calendar year, provided the total of your withdrawals is not more than $25,000.
If you are buying a home with your spouse or common-law partner, each of you can withdraw up to $25,000, for a total of $50,000.
The RRSP money you withdraw must have been in your RRSP’s for at least 90 days in order to be withdrawn tax free.
Generally, you will have to repay all the withdrawn money back into your RRSPs within a period of no more than 15 years. You will have to repay an equal amount to your RRSPs each year until your HBP balance is zero. If you do not repay the minimum amount required for any given year, it will have to be included in your income for that year.
If you are considering buying your first home this is an excellent way to get started. The RRSP money can be used for any purpose so long as you are buying a home. For instance you can use the money to help pay for your closing costs, moving expense, or making some renovations to the home.