The HBP, a tool to increase the down payment of a first property
Finding the necessary funds to make a down payment can be quite tricky. Luckily, the government of Canada has created the Home Buyers’ Plan, also known as the HBP, to facilitate the process of buying a property for new buyers.
What Is the Home Buyers’ Plan (HBP)?
The Home Buyers’ Plan (HBP) allows first-time buyers to withdraw up to $35,000 from their registered retirement savings plans (RRSPs), without being taxed, to buy or build a qualifying home for themselves or for a person related to you with a disability. Funds withdrawn this way have to be reimbursed on a 15-year period.
If you are married or in a common-law relationship,
and your partner would also be a first-time homeowner, you would be able to
double the HBP’s advantages, since your partner will also be able to qualify for the HBP. It is important to
note, however, that locked-in or group RRSPs don’t allow you to withdraw any funds.
What are the conditions I need to fulfil to qualify for the HBP?
To qualify for the HBP, you must fulfil a few conditions:
- Be considered a first-time buyer
- Have a written agreement to purchase or construct a qualifying home for yourself or a person related to you with a disability
- Be a Canadian resident when you withdraw the funds from your RRSPs
- Intend to occupy the qualifying home as your main
place of residence within a year of its purchase or construction
Although the HBP is intended for first-time buyers,
you might be eligible under certain conditions. Indeed, the federal government
considers anyone who doesn’t currently live in a dwelling they or their partner
has owned for the last four years a “first-time buyer.” If you purchased a
property, sold it at least five
years ago, and have been renting since then, you are entitled
to the HBP.
For your funds to be valid for the HBP, they must have
been deposited into your RRSPs at least 90 days prior. It is also important to
note that you will no longer be able to access the Home Buyers’ Plan if you
wait more than 30 days after
purchasing your new home; otherwise the funds withdrawn will be included in
your taxable income.
How do I withdraw funds from my RRSPs?
To use the HBP, you must complete the first part of
the T1036 Home Buyers’ Plan (HBP) Request to Withdraw Funds from an RRSP for each withdrawal. Once this is done, you will have to send the document
to your RRSP provider so they can complete the second part of the document.
You can withdraw the funds in one single withdrawal or a series of withdrawals from one or more RRSPs in the same calendar year.
How do I pay back the funds I get from the HBP?
The repayment period starts during the second year
following the purchase of the property. For example, if you withdrew funds in
2022, your first repayment year would be in 2024. However, you can make
payments earlier, which would reduce the total amount of money you would have
to reimburse during your first year, but the duration of your repayment period
would stay the same. It is always possible to totally pay back the amounts you
withdrew at any time during or before the repayment period.
Since there are many expenses associated with buying
your first home, one of the best ways to make your payments is through a pre-authorized payment strategy. This lets you avoid having to make a large payment
at the end of the year, especially useful when you consider that the
unreimbursed funds are considered taxable.
Every year, the Canada Revenue Agency will send
you an account statement including the amount you have repaid to date, as well
as the balance of the HBP. This information can also be found by going to My account on CRA’s
Can we use the HBP more than once?
Yes, it’s possible to use the HBP more than once in
If you already used the HBP in the past, you could do
it again! You just have to meet all the requirements for eligibility and if
your repayable balance is zero on the 1st of January of the withdrawal year. Someone who has not been the landowner of
their dwelling for the last four years can also qualify again.
Buying your first property is one of the most important steps of your life. Don’t forget to use all the resources and tools available to you to make it more manageable, such as our team of amazing real estate brokers.