Home Buyers Plan

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Home Buyers’ Plan (HBP)

Source: Canada Revenue Agency (CRA)

The Home Buyers’ Plan (HBP) is a program that allows you to withdraw up to $25,000 from your registered retirement savings plan (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability.

Generally, you have to repay all withdrawals to your RRSPs within a period of no more than 15 years. You will have to repay an amount to your RRSPs each year until your HBP balance is zero. If you do not repay the amount due for a year, it will have to be included in your income for that year.

 

Conditions for participating in the HBP

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.

 

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

 

Before applying to withdraw funds under the HBP you must meet the following conditions:

  • You have to 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.
  • You have to 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.
  • you have to be considered a first-time homebuyer (see below for definition).
  • In all cases, your HBP balance on January 1 of the year of the withdrawal has to be zero.

 

Note: Even if you or your spouse or common-law partner have previously owned a home, you may still be considered a first-time homebuyer.

 

When a withdrawal is made you must meet the following conditions :

  • Neither you nor your spouse or common-law partner or the related person with a disability you help buy or build the qualifying home can own the qualifying home more than 30 days before the withdrawal is made.
  • You have to be a resident of Canada.
  • You have to complete Form T1036 for each eligible withdrawal.
  • You have to receive all withdrawals in the same calendar year.
  • You cannot withdraw more than $25,000.

After all your withdrawals have been made you must meet the following condition :

  • 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.

What happens if you do not meet all the HBP conditions?

You are responsible for making sure that all HBP conditions that apply to your situation are met.

If a condition is not met while you are participating in the plan, your RRSP withdrawal will not be considered eligible. You will have to include the RRSP withdrawal as income on your income tax return for the year you received the funds. If we have already assessed your return for that year, we will reassess it to include the withdrawals.

If you do not meet the conditions to participate in the HBP in the current year, you may be able to participate at a later year.

 

Who is a first time home buyer?

You are not considered a first-time home buyer if you or your spouse or common-law partner owned a home that you occupied as your principal place of residence during the period beginning January 1 of the fourth year before the year of withdrawal and ending 31 days before your withdrawal.

If at the time of the withdrawal you have a spouse or common-law partner, it is possible that only one of you will be considered a first-time home buyer.

Example

In 2007, Paul sold the home that he had occupied as his principal place of residence for five years. He then moved into a rented apartment. In 2007, he met Jane and she decided to move in with him. Jane had been renting her own apartment, and had never owned a home.

Jane and Paul were married in August 2010. They wanted to withdraw funds from their RRSPs to participate in the HBP in September 2010. Since Paul owned and occupied his home during the period beginning January 1 of the fourth year before the year he wants to make the withdrawal, he is not considered a first-time home buyer, so he cannot participate in the HBP in 2010.

However, Jane is considered a first-time home buyer, since she never owned a home and did not live with Paul during the period in which he owned and occupied his home as his principal residence. She can participate in the HBP in 2010, as long as all the other requirements are met.

If Jane does not participate in the HBP in either 2010 or 2011, Paul can participate in the HBP in 2012 as he will not have owned a home that he occupied as his principal place of residence since January 1, 2008. If they want to participate together in the HBP, they both have to wait until 2012 at which time they can withdraw funds under the HBP to buy or build a qualifying home.

 

Exception to the first-time home buyer’s condition

You do not have to meet this condition to participate in the HBP if any of the following situations apply to you at the time you make a withdrawal from your RRSPs under HBP:

  • you are a person with a disability and you withdraw funds under the HBP to acquire a home that is more accessible, or better suited to your needs;
  • you withdraw funds under the HBP to acquire a home for a person with a disability related to you by blood, marriage, common-law partnership or adoption, and the home is more accessible or better suited to the needs of that person; or
  • you withdraw funds under the HBP and give those funds to a person with a disability related to you by blood, marriage, common-law partnership or adoption, to acquire a home that is more accessible, or better suited to the needs of that person.
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7 thoughts on “Home Buyers Plan

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    • January 10, 2013 at 5:18 pm
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      No complaints on this end, silmpy a good piece.

    • January 10, 2013 at 5:18 pm
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      With all these silly websites, such a great page keeps my intreent hope alive.

      • September 8, 2013 at 3:35 am
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        I find this article someahwt unfair towards us Brokers. They push the 5 year rate 1) Depending on your income situation, to have any rate under a 5 year term, you must qualify on a certain posted rate (Usually 5%+). Not everyone can qualify on this high rate, therefore the best solution for the client is to take the 5 year term, as they do not have to qualify on the 5% posted rate, but rather the actual rate they are receiving (3.36% for example)2) Yes we get paid depending on what product we sell. The longer the term, the more we get paid. The shorter the less upfront. Should you give a client a 1 year term, you will get paid lower than a 5 year, but assuming the client is happy with your work, they will return to you next year, applying for another 1 year, which in turn mean you get paid again for it. What I am getting at is 1 yr term x 2 = more money in 2 years than you made off selling a 5 year.3) We are paid based on performance. If we don’t close your deal, we don’t get paid. We are motivated. Some banks pay their employees salary, which means they will expect that pay at the end of the week should they close your deal or not. Now you tell me, do you want someone who is hungry for the business, or someone who looks at you like someone who will pass the time for them until the end of the day arrives.This article is completely bias. There are pros and cons for everything.

    • January 13, 2013 at 4:45 am
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      I just came across your blog post and have been renaidg along. I spotted some weird comments, but for the most part I have to agree with what the other commenters are writing.With so many wonderfulgreat reviews of this blog, I was thinking that I would also join IN and let you know that I really enjoyed renaidg this blog.So I think this would be my first comment: I think you’ve made some really insightful points. Not too many people would actually think about it the way you just did. I’m really impressed that there’s so much about this subject that have been revealed and you did it so well, with so much class!

  • January 11, 2013 at 2:01 am
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    I think this is an excellent plan IF you are happy with your curernt home. If, however, you want to upgrade your living situation, putting money into RRSPs isn’t going to help much, whereas by putting money into your mortgage, you’re avoiding that interest and essentially banking it away for a larger down payment for a future home upgrade. Of course, ideally, we’d all be able to do both!Also, I think it’s easy to forget that you’ll always need a roof over your head. So, I’m glad to see that your long term plan doesn’t involve selling your home. Unless the sell was for a downgrade to release some cash, I’m assuming you’d be taking on some additional rent payments where there were no payments before. Either way, it sounds like you’re in great shape. Congrats!

  • January 13, 2013 at 7:25 am
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    Thanks It’s actually been a great enripeexce sharing. I’ve learned a lot by opening up the discussion, and people have been incredibly kind about the whole thing. As for being happy with our current home, yes that’s a big part of why we’re going this way. We don’t have any plans to purchase anything more expensive in the next 3-4 years, which is how long it would take us under this plan to pay down our RRSP TFSA backlog.Once that’s done, it’s back to making our maximum contributions each year, and redirecting anything extra back onto extra mortgage payments.

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