The federal Home Buyers Plan is an effective instrument of housing finance, originally promoted by REALTORS through CREA as a way the government could support home ownership. Since the federal Home Buyers Plan was created in 1992, more than half a million homes have been purchased by first time home buyers using their RRSP investments.
Under terms of the plan, participants in a home buying agreement can borrow up to $20,000 from their RRSP to use in the purchase. Because there are usually two participants involved in the purchase of each home, there is a maximum of $40,000 available from individual RRSP’s that can be used in the down payment. Individuals have 15 years to repay the RRSP withdrawal without penalty. To date, some $2.8 billion has been repaid to RRSP accounts.
In Detail
The Home Buyers' Plan (HBP) allows you to withdraw up to $20,000 from RRSPs to buy or build a qualifying home for yourself (as a first-time home buyer) or for someone who is related to you and is disabled. You may still be considered a first-time home buyer if you own a rental property or if you have not recently owned a home.
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.
You do not have to include eligible withdrawals in your income when you withdraw funds from your RRSP under the HBP; however, you have to repay the amounts over a 15-year period.
Conditions
Certain conditions must be met before you can withdraw funds from your RRSP under the HBP.
ONE of the following conditions must apply:
You are withdrawing funds to buy or build a home for yourself as a first-time home buyer. or
You are withdrawing funds to buy or build a home for a related disabled person.
In addition, ALL of the following conditions must apply:
You enter into a written agreement to buy or build a qualifying home
You intend to occupy the qualifying home as your principal place of residence
Your HBP balance on January 1 of the year of the withdrawal is zero
Neither you nor your spouse or common-law partner owns the qualifying home more than 30 days before the withdrawal
You are a resident of Canada
You buy or build the qualifying home before October 1 of the year after the year of withdrawal
You are responsible for making sure that all HBP conditions that apply to your situation are met.
Important dates
October 1: Normally you must buy or build the home before October 1 of the year after the year of the withdrawal. For example, if you withdrew funds from an RRSP in March 2005, you must buy or build the home before October 1, 2006
For more information, visit the Governement's website.
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