Commonly referred to as the “First Time Home Buyer Plan“, the Home Buyers Plan (HBP) is a Government of Canada program designed to assist first time home buyers and persons with disabilities to purchase or build a home by allowing them to borrow up to $25,000 (tax free) from their RRSP account. To participate, you must not have owned a home or lived in a home owned by your spouse or common law partner during the past 5 years.
However, an exemption to this rule does exist. If you are a person with a disability or you are withdrawing the funds to purchase or build a home for a person with disability or you are withdrawing the funds to give to a related person with a disability then you qualify as long as the home being purchased is better suited to the needs of the disabled person or more accessible than his or her current home.

How does the First Time Home Buyer Plan Work?

You must enter into a written agreement (Offer of purchase) to buy or build a qualifying home. Simply having a mortgage pre approval does not apply. You then need to fill out Form T1036, for each RRSP withdrawal you make. If you have an RSSP plan through your employer, talk to them for assistance. If you do not, you can obtain a form from the Revenue Canada website or contact the company that manages your RRSPs.
You can withdraw a single amount or make a series of withdrawals throughout the same year and January of the following year, as long as the total of your withdrawals is not more than $25,000.

Remember that if you buy a home with a partner, each of you can withdraw up to $25,000 from your own RRSP accounts provided that you qualify. Finally, when you withdraw funds from your RRSPs under the HBP, you have to occupy the home as your principal residence within 1 year of buying or building it. Once you occupy the home, there is no minimum period of time that you have to live there.

Repaying the First Time Home Buyer RRSP Plan

You have to start repayment in the second year following the withdrawal of the money from your RRSP’s. Each year, the Government will send you a Statement of Account that will show how much you repaid, the amount owing, and how much you should pay for the following year. You have up to 15 years to repay the money borrowed.
To start repaying the money that you withdrew from your RRSP plan, you need to make contributions to your RRSP plan in the year that the payment is due. You will also have to file a schedule 7 with your tax return to designate that the contribution is a HBP repayment.
It is important to remember that any funds designated to repayment are not considered RRSP contributions for tax purposes. For example, if Bob contributed $8000 to his RRSP’s and $500 of that was for HBP repayment then only $7500 would count towards a tax deduction.

Final Thoughts

The HBP is a very common and excellent way for first time home buyers or persons with a disability to save for home ownership. This is especially important now that the 0% down mortgage is no longer available. Using the HBP allows the buyer the advantage of using tax sheltered savings which means you will have more funds available for a down payment than through a conventional savings plan.

**This article is intended for informational purposes only, for any questions or official guidelines contact Revenue Canada or visit:
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