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The Home Buyers' Plan (HBP) in Ontario - borrowing from your RRSP's
This page will give you insight into the current government plan for home buyers in Ontario. You can borrow up to $25,000 from your RRSP to use as a downpayment to purchase your next home!
The Home Buyers' Plan (HBP) allows you to withdraw up to $25,000 from RRSP's to buy or build a qualifying home for yourself (as a first-time home buyer) or for a related disabled person. 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.
This is a temporary "loan" from your RRSP — you must pay back the amount you borrow from your RRSP for the Home Buyer's Plan within 15 years or it will be added to your taxable income.
You can make withdrawals from more than one RRSP as long as you are the annuitant (plan owner). Typically, you will not be allowed to withdraw funds from a locked-in RRSP.
How the Home Buyers' Plan works
- The Home Buyers' Plan (HBP) allows you to use money in your RRSP's for a down payment on a principal residence.
- You can use up to $25,000, or $50,000 per couple, of your RRSP's toward the purchase of a home, as long as the funds are not locked in. For example, an RRSP from a pension plan that that is inaccessible until age 55 would not qualify.
- You can use your RRSP's to acquire an accessible or better-suited home for a disabled relative (related to you by blood, marriage or adoption).
- You must meet the government's requirements as a first-time home buyer to make this withdrawal. The primary requirement is that you or your spouse has not owned a home in the last five years.
- Withdrawals are not deemed to be taxable income in the taxation year in which they are withdrawn.
- There is a no-penalty, 15-year payback period for the RRSP money. Under the terms of the Plan, buyers are required to re-contribute 1/15 of the withdrawal each year, starting two years after the withdrawal was made.
Repayment
- If the minimum annual repayment is not made as scheduled, that amount is included as income for that year.
- Additional repayments may be made if desired; this will result in a smaller outstanding balance and lower scheduled repayments for the rest of the payback period.
- The repayment does not need to be made to the same RRSP from which the original withdrawal was made. You must, however, be the plan holder.
- You cannot direct your repayment to a spousal RRSP.
Conditions
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
- 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 Home Buyers' Plan 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 Home Buyers' Plan 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 you do not meet the conditions to participate in the HBP in the current year, you may be able to participate at a later date.
Here's what you need to know:
Are you leaving money on the table?
- The RSP funds must be on deposit for at least 90 days.
- You require a signed agreement to buy or build a qualifying home - new or resale.
- Of the borrowed RSP funds, 1/15 must be repaid each year beginning two years after the funds were withdrawn.
- Your RSP carrier can provide you with Form T1036 for completion.
- Mortgage Calculators
calculate your mortgage payments- You can only participate in the program once.
- Read more about RRSP's here
- Read more about the home buyers plan here.
- For further information and all details about the Home Buyer's RSP Plan, please visit Revenue Canada's Web site under Home Buyers Plan (HBP):
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mark@mississauga4sale.com Copyright © A. Mark Argentino, P.Eng., Broker, RE/MAX Realty Specialists Inc., Brokerage, Mississauga, Ontario, Canada L5M 7A1 (905) 828-3434 First created - Tuesday, July 16th, 1996 at 3:48:41 PM -
Last Update of this website: Wednesday, February 1, 2012 9:15 AM
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