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Using Your RRSPs To Buy A Home - The Home Buyers' Plan (HBP)

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 $25,000 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.

 

Before applying to withdraw funds under the HBP you must meet the following conditions (as quoted on CRA site):


•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. Obtaining a pre-approved mortgage does not satisfy this condition.
•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 home buyer.
•In all cases, your repayable HBP balance on January 1 of the year of the withdrawal has to be zero.

 

Repaying your withdrawals:


Over a repayment period of no more than 15 years, you have to repay to your RRSPs the amounts you withdrew under the HBP. Generally, for each year of your repayment period, you have to repay 1/15 of the total amount you withdrew, until the full amount is repaid to your RRSPs or PRPPs. Your repayment period starts the second year following the year you made your withdrawals.

To make a repayment under the HBP, you have to make contributions to your RRSPs or PRPPs in the year the repayment is due or in the first 60 days of the following year. Once your contribution is made, you can designate all or part of the contribution as a repayment under the HBP.

 

Example:


In 2011, Robert withdrew $6,000 from his RRSPs to participate in the HBP. Robert's repayment for 2013 is $400 ($6,000 ÷ 15).

In 2013, Robert contributes $8,200 to his RRSPs. Robert could deduct the full amount as an RRSP contribution on line 208 of his 2013 income tax and benefit return because his notice of assessment for 2012, shows that he has an RRSP deduction limit of $11,000 for 2013. However, he knows an HBP repayment is required.

Therefore, Robert files Schedule 7 with his 2013 income tax and benefit return and records his $8,200 RRSP contribution on line 245. He designates $400 of this amount as an HBP repayment on line 246 of Schedule 7. Robert deducts the remaining $7,800 as an RRSP contribution on line 208 of his 2013 income tax and benefit return.

 

The HBP can be an effective way to own your own home. Please ensure to speak to a financial advisor for assistance and consult a licensed account when filing your repayments.

 

 

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