Budget 2019 increase the HBP withdrawal limit to $35,000. This applies to withdrawals made after March 19, 2019.
The Home Buyers' Plan (HBP) is a program that allows you to withdraw funds from your Registered Retirement Savings Plans (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability. The HBP allows you to pay back the withdrawn funds within a 15-year period.
You can withdraw funds from more than one RRSP as long as you are the owner of each RRSP account. Your RRSP issuer will not withhold tax on withdrawn amounts of $35,000 or less. Some RRSPs, such as locked-in or group RRSPs, do not allow you to withdraw funds from them.
Certain conditions must be met in order to be eligible to participate in the HBP, including the following:
- you must be considered a first-time home buyer
- you must have a written agreement to buy or build a qualifying home, either for yourself or for a related person with a disability
- you must be a resident of Canada when you withdraw funds from your RRSPs under the HBP and up to the time a qualifying home is bought or built
- You must intend to occupy the qualifying home as your principal place of residence within 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 to buy or build a qualifying home, you must intend that that person occupies the qualifying home as his or her principal place of residence
- In all cases, if you have previously participated in the HBP, you may be able to do so again if your repayable HBP balance on January 1st of the year of the withdrawal is zero and you meet all the other HBP eligibility conditions.
Do you meet the HBP eligibility conditions?
- You must be considered a first-time home buyer.
- You must have a written agreement to buy or build a qualifying home for yourself.
You must have a written agreement to buy or build a qualifying home for a related person with a disability, or to help a related person with a disability buy or build a qualifying home (obtaining a pre-approved mortgage does not satisfy this condition).
The Home Buyers' Plan (HBP) is a program that allows you to withdraw funds from your registered retirement savings plans (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability. You can withdraw up to $35,000 in a calendar year.
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.
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.
FIRST TIME BUYER:
You must be a first time home buyer or you (or your spouse or common law spouse) must not have owned a home that you occupied in the last five (5) years. Provided you satisfy all requirements, you may re-activate the program. Before withdrawing RRSP funds, you must have a written agreement to purchase a home.
You must use the home as your principal residence in Canada within one year of completing the purchase.
RESIDENT OF CANADA:
You must be a resident of CANADA for the period between the date of withdrawl of RRSP funds and the closing date of the house purchase.
ANY HOME (NEW OR RESALE):
The home can be new from the builder or resale.
NO MONEY OWED FOR PRIOR RRSP BORROWINGS:
At the time of the RRSP withdrawal, you must NOT owe any money to your RRSP for a prior borrowing from RRSP to buy a home.
90 DAY DEPOSIT;
R.R.S.P. funds must have been on deposit for at least 90 days before they can be used under the program.
WITHDRAW RRSP WITHIN 30 DAYS OF COMPLETING HOME PURCHASE:
RRSP funds cannot be withdrawn later than 30 days after the house purchase is completed and if multiple withdrawals, they must be made in the same calendar year or in January of the next year.
FUNDS FOR ANY USE:
The funds can be applied to the downpayment, land transfer tax, legal fees and disbursements, improvements to the home, even furniture and appliances.
MAXIMUM $35,000.00 PER BUYER:
You can borrow up to a maximum of $35,000.00 from your R.R.S.P. tax free. Maximum for two spouses (or any 2 buyers) is $70,000.00. Any such qualified withdrawal from RRSP is not subject to tax at time of withdrawal.
After an initial grace period of the year in which the withdrawal was made (plus one more full calendar year), you are required to pay back the funds borrowed (beginning in the second year following the year of withdrawal) over a period of 15 years by depositing 1/15th of the amount withdrawn, annually to your R.R.S.P. Prepayments are allowed at any time without penalty. However, if you miss a payment for any given year, you will not be allowed to pay it back and it will be included in your taxable income for that year. If a person paying back dies or becomes a non-resident or becomes 70 years of age, additional repayment rules apply.
Existing homeowners can use the HBP to purchase a more accessible home or a home for a disabled dependent relative where the individual withdrawing the funds:
- Qualifies for the disability tax credit (DTC) and is buying a home that is more accessible for the individual or is better suited for the care of the individual.
- Is related to a disabled individual who qualifies for the DTC and is buying a home for the benefit of the disabled individual that is more accessible for, or better suited for, the care of the disabled individual.
- Is related to a disabled individual who qualifies for the DTC and is withdrawing an amount for the disabled individual to buy a home that is more accessible for, or better suited for, the care of the disabled individual.
You can participate in the HBP more than once if:
- Your HBP balance for your previous participation is zero on January 1st of the year you want your new participation in the HBP to occur
- You meet the first-time buyer’s condition and all other HBP conditions that apply to your situation.
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