Home Buyers' Plan (HBP)
The Home Buyers' Plan (HBP) is a Canadian government program that allows first-time homebuyers to withdraw funds from their Registered Retirement Savings Plan (RRSP) to help with the down payment on a home. Here's how it works:
1. How the HBP Works
Withdrawal from RRSP: You can withdraw up to $35,000 from your RRSP tax-free to use as a down payment on your first home.
For couples: Both individuals can withdraw $35,000 each, for a total of $70,000.
Tax-Free: The withdrawal is not taxed as long as the funds are used to buy or build a qualifying home.
2. Repayment Terms
15-Year Repayment: You must repay the amount withdrawn back into your RRSP over 15 years.
Each year, you must repay at least 1/15th of the total withdrawal.
If you miss a repayment, that amount will be added to your taxable income for that year.
3. Eligibility
First-Time Homebuyer: You must be a first-time homebuyer or have not owned a home in the past four years.
Home Purchase: The home must be purchased or built in Canada and must be your primary residence.
RRSP Contributions: The funds must have been in your RRSP for at least 90 days before withdrawal.
4. Important Considerations
No Taxes on Withdrawal: If you repay the withdrawn amount according to the rules, you won't face any tax on it.
Primary Residence: The home must be intended for your personal use, not for rental or resale.
Limited Time: You must buy or build the home before October 1 of the year after the withdrawal.
5. How to Apply
Step 1: Open an RRSP account if you don't already have one.
Step 2: Withdraw the amount from your RRSP, ensuring it's used for the home purchase.
Step 3: Repay the withdrawn amount into your RRSP over the next 15 years.
The HBP helps reduce the financial burden of purchasing a home by giving you access to your RRSP savings without taxes, as long as you follow the repayment rules.
