How the RRSP Home Buyers Plan (HBP) Works
When I bought my first home when I graduated in 2003, I was fortunate enough to have some cash saved for a down payment. Most young people, however, don’t have this luxury but they have some money in an RRSP. In this particular situation, using the RRSP First Time Home Buyers Plan (HBP) can be of great benefit.
What is the HBP?
The RRSP Home Buyers plan is a program that allows first time home buyers to withdraw up to $20,000 $25,000 (as of 2009 federal budget) from their RRSP towards their first home TAX FREE.
How does it work?
As mentioned above, if you are a first time home buyer, you can withdraw up to $25,000 out of your RRSP tax free! If you are purchasing the home with a spouse, you can both withdraw $25k EACH from your accounts. In terms of repayment, you have up to 15 years to pay back your RRSP starting the second year after the year of withdrawal (from govt website). At this time 1/15 of your borrowed amount must be paid back / year.
What’s the catch?
- In terms of penalties, if you don’t repay 1/15 of the borrowed amount / year, you’ll have to add the amount as income.
- You MUST be a first time home buyer and a resident of Canada at the time of withdrawal.
- You MUST purchase/build the home before Oct 1 after the year of withdrawal.
- RRSP contributions of up to 90 days before the withdrawal date can be used towards the HBP.
Why would I do this?
This is one of the only ways to withdraw from your RRSP tax free and a great way to get yourself into the real estate market. Some may argue that you’re missing out on growth in your RRSP while the money is borrowed. However, I think that if you get a good price for your first home relative to others in the neighborhood, the appreciation of the home will hopefully make up for this.
On top of that, aggressive RRSP contributions after purchasing the home should be part of the plan. Here is the government site that explains the HBP program in detail: Home Buyers’ Plan (HBP)
155 Comments, Comment or Ping
1. FinancialJungle.com
Good post. For many first-time buyer, HBP helps push you over the 20% threshold to avoid paying CMHC insurance. In addition, every dollar pulled out of HBP saves you 5.69% in mortgage interests or equivalent to a guaranteed 9.5% pre-tax gain if you’re in the 40% tax bracket. So, I don’t miss the growth inside RRSP at all.
Jun 4th, 2007 @ 5:27 am
2. The Financial Blogger
FJ,
I agree with you but I would just add to not take the full 15 years to put back the money into your RRSP. If not, you will definitely miss the growth inside your RRSP portfolio.
By using the HBP, it is easier to put 20% cash down and therefore not pay CMHC premium. The minimum cash down required was previously 25% but was changed in April.
http://www.thefinancialblogger.com/lower-cash-down-required-by-banks-starting-from-april/
Cheers,
FB.
Jun 4th, 2007 @ 7:03 am
3. FourPillars
FB – I would say if your rrsp is maxed out then it makes sense to pay down the HBP quicker but if you have rrsp room, then that should be used first.
I would also say if you have a large mortgage – you might want to pay down the mortgage itself with extra funds rather than the HBP. The reason for this is because the HBP payments will not change with interest rates whereas the mortgage payments will.
Mike
Jun 4th, 2007 @ 9:04 am
4. Kevin
If your RRSP is earning more than the mortgage rate you can get, why wouldn’t you pursue a zero down mortgage and leave your RRSP money invested?
Jun 4th, 2007 @ 11:09 am
5. Traciatim
I just recently used the HBP to get in to my first home. In my situation my employer matches my contributions to the RRSP and then they are yours to keep for any purpose. Both my spouse and I worked here at the time so we both opened the RRSPs for the sole purpose of the matching and using the funds for the home purchase. We got tax breaks, matched contributions, and now we own a home. I think in this situation it was win-win all around.
Jun 4th, 2007 @ 12:20 pm
6. FrugalTrader
Kevin: Zero down mortgages add an extra premium onto the interest rate AND CMHC fee. You’d have to guarantee a return of 10%+ in your RRSP to beat paying down your mortgage.
Jun 4th, 2007 @ 12:59 pm
7. Michael_S
Here’s what we did in 2003 when we bought our first home. In February, we took the $8400 we had saved up for down-payment and bought a money market RRSP.
After waiting the 90 days required, we withdrew the money to use towards the HBP. So we got our $8400 (+ $40 gain) back out, added the $2600 or so we got back as a tax refund on the $8400 and ended up with around $11,000 for a down-payment.
Jun 6th, 2007 @ 3:58 am
8. Krystal
Thanks for writing this post. I’m in the process of saving up for a down payment on a condo, and the HBP is something I didn’t know much about.
I got to your site through Money Diva’s … I didn’t know so many great Canadian finance blogs were out there! Definitely putting your site on my blogroll.
Thanks again!! :)
Jun 7th, 2007 @ 1:53 am
9. FrugalTrader
Krystal: If you have an employer matching RRSP at work, the HBP can give you a real head start in saving for your down payment. As mentioned above though, the HBP should be paid back quickly.
Jun 7th, 2007 @ 8:51 am
11. nobleea
Most banks will be happy to help you with the HBP. BMO actually had a pamphlet on how to do it. First you need at least 20K in available RRSP contribution room. Then the bank gives you an RRSP loan for 20K. You contribute it and get a tax refund for 20K*marginal tax rate (this is usually over 6K). After 90 days, you withdraw the original 20K contribution and pay off the bank loan. Your only costs are the interest on the loan for 3 months.
In essence what you are doing is immediately getting the tax refunds for 20K in future RRSP contributions.
Some people will say you lose the value of compounding – you don’t with this plan since the money was never yours.
Most people have available RRSP contribution room so that’s not an issue either.
Jun 27th, 2007 @ 4:30 pm
12. Mark
A few points:
1) You only need $18k of RRSP contribution room — you can make a $2k overcontribution, and then withdraw the full $20k from the RRSP for the HBP.
2) Yes you avoid CMHC fees if you can go with an uninsured mortgage. This can save you literally thousands of dollars. Further, once you have a >20% mortgage you can do what’s known as the ‘Smith Manouevre’. For many, this can provide higher long-term returns than possible through RRSP investing.
3) Pay back the HBP as slow as you can, within RRSP contribution restraints. Only pay back the minimum possible under the HBP. Use the rest to make mortgage prepayments.
Jul 25th, 2007 @ 3:05 am
13. FourPillars
Mark – you don’t get any tax deferment from the $2000 overcontribution so there isn’t any value in putting it in for the purposes of taking it out again for HBP.
Jul 25th, 2007 @ 11:25 am
14. sam
hi fourpillars,
agreed we get no tax benefit on the $2,000 overcontribution..but come next year..you would have a fresh RRSP limit based on your current year’s income…so you could use the $2,000 on next year’s taxes…
thanks
Jul 25th, 2007 @ 4:43 pm
15. FourPillars
sam – good point.
Mike
Jul 25th, 2007 @ 8:57 pm
18. rob
pay off HBP , can i borrow again
Jan 26th, 2008 @ 11:53 pm
19. nobleea
rob, i think you can’t have owned a home in the past 5 years if you want to do it again. but yes, i think you can do the hbp more than once in your life as long as you meet the conditions.
Jan 26th, 2008 @ 11:57 pm
20. Rob
who would know if i met the requirements for HBP. I plan on paying back the last 2000 on HBP from 1999 this year. The money is already in my RRSP for the buy. I was told by bank I could borrow again if the loan was pay off. Sold the first home from a break up. Do not own house ,just rent right now. I was planning to buy this year Please advise or point me in the right direction.
Jan 27th, 2008 @ 12:28 am
21. nobleea
from CRA’s conditions for home buyers plan:
http://www.cra-arc.gc.ca/tax/individuals/topics/rrsp/hbp/conditions/menu-e.html
“You are not considered a first-time home buyer if you or your spouse or common-law partner owned a home that you occupied as your principal place of residence during the period beginning January 1 of the fourth year before the year of withdrawal and ending 31 days before your withdrawal.
You have to meet this condition at the time you withdraw an amount from your RRSPs under the HBP.”
they can check your previous years tax returns and match them up to your original HBP application with the same address on it (until you sold the home and changed your address on your tax return)
Jan 27th, 2008 @ 12:52 am
22. g
I withdrew 20,000 from my RRSP account via the HBP. I am now in the process of paying this amount back. The past two tax years, I have over contributed to my RRSP (approx 1000), thus carrying a balance to the next year. I have once again overcontributed. Can this overage be use to pay back the HBP loan?
Jan 28th, 2008 @ 10:38 pm
23. Bryce
Paying back your HBP does not come from your RRSP contribution limit so you can pay as much of it back at any time. So, yes you could apply the overages to your HBP.
Jan 29th, 2008 @ 12:55 pm
24. Geri
Similarly (23), I have over contributed because of taking out an RRSP loan to increase my max. to $20,000 for the purposes of participating in the HBP. Can I too apply these over contributions to paying back the HBP??? Also, what is the maximum you can pay back in a given year?
Feb 6th, 2008 @ 11:25 pm
25. Geri
Similarly (23), I have over contributed because of taking out an RRSP loan to increase my RRSP to $20,000 for the purposes of participating in the HBP. Can I too apply the resulting over contributions to paying back the HBP??? Also, what is the maximum you can pay back in a given year?
Feb 6th, 2008 @ 11:26 pm
26. nobleea
Geri; There is no maximum yearly payback amount. You could pay back the whole amount any time (though it is not recommended). You can allocate your overcontributions to paying back the HBP. The HBP allocation comes off the top, then whatever is left over would be your overcontribution (over and above the contribution limit).
However, if you overcontributed with the loan in order to do the HBP, you will be a year off. The HBP repayment doesnt’ start for another year, so you can’t allocate your overcontribution to it since you’re not in the HBP yet.
Feb 6th, 2008 @ 11:55 pm
27. layman
Since I’m at higher income now and i just purchased a large rrsp on a short term Heloc (to be paid off in a month when my house sells and i rent for a bit).
This way I get max tax back now and will be able to continue maxing it out next year even though my income will be lower.
My question though is should i pay the minimum owed on the hbp or pay it off with the house sold. Since im going to be at a lower rate next year, wouldn’t i be better off paying it off later than in a lower income year? Whats the advantages of carrying the balance for the full 15 yrs?
Feb 20th, 2008 @ 9:30 pm
28. Andrew
I am going to buy a new condo to be my first home. So I would qualify for the HBP Plan. It’s $20,000 no tax, no interest is very attractive. Repaying it is not much an issue. What I do not understand is that in all the examples I can read from the gov’t RRSP and HBP guide, I cannot find a situation as below:
Say, my annual deduction limit is about $10,000 and because of the repay to be done for the $20,000 over 15 year period, each year is about $1,400. So, does that mean I can contribute $10,000 + $1,400 = $11,400 each year for RRSP after the grace period of 2 years is over, or I can only contribute $10,000 and the $1,400 will be taken from the deduction limit to become the repayment amount?
I am leaning towards the former scenario because the latter does not make sense. My opinion is that if the HBP plan works in the latter case, it would mean that $1,400 will be on a 16% interest or whatever the tax bracket it is deferring my tax…
Which one is the correct case?
Feb 26th, 2008 @ 3:48 pm
29. nobleea
Yes, I think you have it right. You can contribute 11,400. But you will only see a tax refund for the 10,000 since you already got the tax break for the 1400 when you first contributed it.
When you boil it down, all the HBP is, is an interest free loan for all your future tax refunds on RRSP contributions (up to 20K). The longer you spread out the loan, the better (15 years interest free).
Feb 26th, 2008 @ 3:56 pm
30. Traciatim
I agree with Nobleea, though I haven’t specifically asked the CRA that’s how I understood The HBP to work. The HBP repayment is separate from your actual RRSP contributions and should not have any effect on your contribution limit.
Feb 26th, 2008 @ 11:24 pm
31. Andrew
Conversation with the so-called RRSP expert @ CRA…
Well, it’s a matter of 15% of 20k, with potential of increase rate over the course of 15 years, so I called and ask.
The first person who gets the phone ask me to hold so she can fetch an “expert” in this matter. The expert initially said it is the latter case that applies, when I pressed for my doubts, has fetched another more senior expert, who reversed the verdict.
It gives me an impression that the cra personnel doesn’t deal with this scenario much and don’t know what they are talking about…
Feb 28th, 2008 @ 1:46 pm
32. michael
Hi,
My friend bought her first home and moved in on Jan 1, 2008.
She specifically asked about when she needed to withdraw the RRSP for the payment and was told any time with-in a year.
She found out in March that this was the WRONG answer and now she is going to have to pay taxes on the money she withdraw’s as she doesn’t meet the condition anymore.
She didn’t have internet and this was her first home and she had to go with the info she was provided. Is there some way she can get around this and still qualify as it wasn’t her fault? The typical call centers all say no but sometimes there ARE way that calls centers don’t like to tell you about.
Thanks!
Apr 8th, 2008 @ 3:14 am
33. Bill
I have a similar question to Andrew’s: If I have an RRSP contribution limit of $8,000 and have a minimum repayment towards my HBP of $1500. If I overcontribute to my RRSP by more than $2000 (eg. $5000 so I have actually contributed $13.000) and apply the full $5000 towards my HBP, will I have to pay the 1% penalty for overcontribution?
I would think not, otherwise that would mean no one could ever repay the full amount early without penalty.
Apr 16th, 2008 @ 1:26 pm
34. Traciatim
Bill, as I understand it, as stated above, the HBP repayment is treated separately from your actual RRSP contributions. Both the withdrawal and the repayment do not effect your contribution limits. So this year you have 8000 in room and a 13000 contributions to your RRSP, on your 2008 tax forms you would designate the 5000 to repay your home buyer plan, and 8000 to the RRSP. You are within your contribution room and you would only see you net income (line 236) reduced by the $8000.
Apr 16th, 2008 @ 1:31 pm
35. Nicole
I recently opened an rrsp account and had no clue about $20,000 towards a house. My question is, is if i ever buy a house, it will solemnly be under my name, as my partner has $50,000+ in school debt from 10 years ago. Can he open as well an rrsp account as well and use his $20000, share with bad credit?
Apr 20th, 2008 @ 12:58 am
36. Traciatim
If your partner is a spouse or common law partner then you both can borrow 20,000 for a total of 40,000 from your respective RRSPs if either of you buy a house. If you are making spousal contributions I think there are rules as to how long the funds need to be in the RRSP before they can be withdrawn for any reason, so you may want to look in to that with an accountant or other advisor.
You can get all the details on the HBP here:
http://www.cra-arc.gc.ca/E/pub/tg/rc4135/README.html
Apr 20th, 2008 @ 10:23 am
37. DAvid
Nicole,
You may also learn that his contribution in this manner requires he be named on the mortgage, a step you wished to avoid.
DAvid
Apr 20th, 2008 @ 12:30 pm
38. Traciatim
David, I don’t believe that is correct. Source?
Apr 20th, 2008 @ 4:59 pm
39. DAvid
Traciatim,
My ’source’ is contained in the link you provided. The rest is ‘connect the dots’.
“If you buy the qualifying home with your spouse or common-law partner, or with other individuals, each of you can withdraw up to $20,000.”
Each individual must enter into the purchase of the home to obtain the HBP eligibility. If both are named on the deed, the bank MAY demand both names on the mortgage. Since Nicole’s spouse has a financial interest in the home due to his contribution of the share of the downpayment, the bank’s diligence MAY further require his name on the mortgage. Finally, in nearly any partnership situation, the bank will want to ensure other partners are fully aware of the debt and responsibilities the other partner(s) are engaging. This is usually accomplished by including their names on the mortgage docs.
If you have other info, please share it, as I’d like to learn of it.
DAvid
Apr 20th, 2008 @ 6:27 pm
40. JR
DAvid, if I may add to this.
Could it be Traciatim, was asking about your comment to “a step you wish to avoid”?
In that a guy with bad credit & lots of debt ($50k worth of student debt) withdrawing $20k for an RRSP may infact not be eligible for a mortgage?
Or is the real question about the fact that the boyfriend has no RRSP’s, and no mention if he is a first or second time home owner. Possibly two things to consider including the 4-year rule, as well as if the dude would qualify?
Dont forget also the within 30-day rule about funds being withdrawn from the RRSP otherwise not eligible
Apr 20th, 2008 @ 6:40 pm
41. DAvid
JR, Here’s how I read it:
I recently opened an rrsp account and had no clue about $20,000 towards a house.
I’m new to this and didn’t realize this option was available to save for a downpayment.
My question is, is if i ever buy a house, it will solemnly be under my name, as my partner has $50,000+ in school debt from 10 years ago.
Sometime in the future, I may want to buy a house. Since my partner has this bad debt, and has not yet addressed it, I don’t want him to be affecting my mortgage eligibility, therefore I’ll apply independent of him.
Can he open as well an rrsp account as well and use his $20000, share with bad credit?
From this I made my assumption, and statement that if he is involved in the down payment, the bank may (will) want his signature on the mortgage, removing Nicole’s application independence.
I could have misread the entire thing?
DAvid
Apr 20th, 2008 @ 7:18 pm
42. Nicole
Hello,
As mentioned before, i am the only one with good credit. My common-law partner on the other hand has $50,000 + in school debt from over 10 years ago. His last resort might just be to claim bankruptcy. I am trying to perhaps have one of my family members to co-sign with me for the house and that way if he claims bankruptcy then he can start to build his credit again. So if his name has to be on the mortgage to take out $20,000 from an RRSP, then this would not be possible. Therefore, with my RRSP, i can only take out for myself with the $20,000. The other problem i had, is that i was told from my bank that if i take out a mortgage in my name only, then they can only give me a mortgage solemnly on my income and not his, and therefore i will only be able to get like a $100,000 if i am lucky! With Ottawa’s housing market will be impossible. Currently we are paying $950 in rent with no problem and after all of our bills paid at the end of the month, we have close to $2000 in disposable income. So to be paying a mortgage at $950 or more would be no problem. It is so HARD to get a mortgage! My father stated to try a mortgage broker as they may be more lenient to lend out bigger loans but could be a higher interest rate. Any other ideas???
Apr 20th, 2008 @ 7:48 pm
43. DAvid
My suggestion is to first address the $50,000 debt. A concerted effort should pay it off in less than 2.5 years, while addressing his credit report.
David
Apr 20th, 2008 @ 8:35 pm
44. JR
Nicole how do you both plan to get the RRSP built up to $20k each and how long it would take?
I can tgive advice, but it would seem that cleaning the debt and getting the credit rating back up, then build the RRSP to save for the house would be the logical steps … but this could take up to 5++ years for the whole plan.
In the event your partner declares bankruptcy and hopefuly whoever is after your partner cannot garnish wages, then you should know that there is a seven year hold over on the credit. In the meantime as DAvid said, start repairing the credit.
Seems you have a tough stretch, however with $2000/mth of disposable income its possible… but it will take time
Prioritise what is important to you and really figure out which of the brankruptcy or clearing the debt is right for your situation
Apr 20th, 2008 @ 8:53 pm
45. Traciatim
Hmmm, that’s interesting. I never really thought that you had to both be on the deed, on that the family was buying the home. I am in a common law relationship and am solely owner of our home (Deed and Mortgage), yet both of us withdrew funds from our respective RRSPs when the offer to purchase was accepted. Neither of our financial institutions requested that both names be on the deed or mortgage.
I’ll do some more digging and if I can’t find anything I’ll call the CRA and ask and let you know what the official ruling is. If we withdrew in error I guess I will have to file a correction for last years taxes and include her withdrawal as income rather than under the HBP, but I’ll not get ahead of myself until that time comes :)
Apr 20th, 2008 @ 9:49 pm
46. Traciatim
Yes, David is correct and I was not. In order to be eligible to withdraw funds from an RRSP under the home buyers plan your name (without the disabled person extras I mean) must appear on the agreement to purchase the home. Since that’s the case both people must be on the mortgage, insurance, and all other related items.
Looks like I have to readjust my spouses 2007 taxes to reflect her withdrawal as income rather than under the HBP. I’m just happy it was a small withdrawal and shouldn’t effect the total tax owed by any great amount.
Apr 22nd, 2008 @ 12:17 pm
47. Jamie
My common-law husband withdrew funds from his RRSP so we could use it to buy the home we bought in July/07.
His RRSP statement from his investment co., at the end of the year, showed the sale of the mutual funds (gain from when they were bought) and a service charge of $107.00
Does he have to claim capital gains on those funds that were sold and can he claim the service charge?
Apr 22nd, 2008 @ 5:55 pm
48. Traciatim
Jamie, you should have received the T4RSP from the financial institution showing the income for you to fill out your forms, or software, or to give to your tax preparer. If it was not through the HBP, the withdrawal will be treated as regular income, not a capital gain.
I’m not certain on the fee, but I’m pretty sure he can not claim the service charge. You may ask a tax professional or call the CRA, contrary to popular belief they are very helpful and the wait times aren’t too long at all. In fact, that was actually one of the most pleasant calls I’ve made to any company in a while when I called to ask about the HBP above.
Apr 22nd, 2008 @ 6:22 pm
49. DAvid
Traciatim,
In law, there is a Mr. Traciatim and there is a Mrs. Traciatim, but there is no Mr. & Mrs. Traciatim. This follows through to issues such as your tax return, which does not allow you to submit a combined return, but rather requires a joint return. It also means you are not responsible for her speeding tickets…….
Thanks for sharing the info you gathered.
DAvid
Apr 22nd, 2008 @ 10:17 pm
50. Jamie
Thanks for your response, Traciatim,
He did receive a T4RSP for the amount of the HBP.
I have called CRA about the service charge and they are calling me back.
I have called CRA on other issues and they have been terrific. The last time I left a msg, they called me back the next day.
Apr 23rd, 2008 @ 8:53 am
51. Denis
I am new to RRSP and have a few questions.
Hope someone can help.
I purchased 15K of RRSP’s for 2007 and the intent was to save taxes for 2007 because of my business which is classified as a proprietorship. As of this month I purchased a home (In the process of closing the purchase) and found out today that I can use my RRSP’s as a first home buyer.
My questions is, can I still use my RRSP’s as a first home buyer and still use my RRSP’s for the intent of saving taxes on my business for 2007?
Very new to all of this, any help would be appreciated.
Thanks!
Apr 24th, 2008 @ 6:53 pm
52. Traciatim
Hey Dennis, The home Buyer plan has a limit of 90 days before you can make a withdrawal of any funds deposited, you must be in an agreement to buy or build a home, and you can’t make the withdrawal under the HBP if you’ve owned the home for more than 30 days. If you can swing this, then yes you should be able to claim both the contribution in to the RRSP if it was in the first 60 days of the year on your 2007 return and the HBP withdrawal on your 2008 return next year for the same amount. Keep in mind doing this is kind of like borrowing from your future since you have to pay the funds back to the RRSP over 15 years or include the funds as income.
You should probably read through the home buyer plan guide found http://www.cra-arc.gc.ca/E/pub/tg/rc4135/ . . . or possibly consult a tax professional, since I’m just some guy who’s read the guides and messed up my spouses withdrawal with no tax training at all ;)
Apr 24th, 2008 @ 9:32 pm
53. Jamie
I heard back from the CRA on the service charge that the investment company charged on cashing in the RRSP portion to use on our HBP. He said that we can not claim the service charge on my husband’s income tax return.
He explained how the HBP worked (even though I knew) and was very pleasant.
Apr 24th, 2008 @ 11:24 pm
54. John
As a warning…
If you don’t make an RSP contribution during a given repayment year, your HBP minimum repayment amount becomes taxable.
Secondly, that taxable minimum repayment amount doesn’t reduce the remaining HBP payable, therefore, future RSP contributions still need to be applied against the remaining HBP balance.
For example:
$300 mininum HBP payment
$3000 remaining balance
$0 RSP contribution for the current year
$300 mininum payment becomes taxable ($78 income tax @ 26% bracket). Remaining HBP balance: $3000 (unchanged). Future RSP deductions still need to be applied against the $300 amount already taxed. A double taxation.
An RSP flip (borrowing to max out your RSP contribution) is an excellent way to get into ownership. But ensure your RSP contributions offset your HBP repayments EVERY year.
Just found out tonight from the CRA tonight…
Apr 30th, 2008 @ 12:32 am
55. dead tired
Is there any sense in using hbp to extract poor paying rrsp funds ($40kboth of us)
and using it to purchase better funds in a rsp.
then repaying back only wifes plan ,as I am early retired? why?
May 6th, 2008 @ 2:26 pm
56. DAvid
dead tired,
You should be able to switch any of the funds in your portfolio, unless they are locked into some form of defined contribution plan. Since you are retired, you should be able to manage yours as you see fit. Your wife’s, if not a ‘locked-in DCP’, should also be managable to your satisfaction. There should be no need to use the HBP to accomplish this task.
I recommend you talk to a financial advisor independent of your funds supplier BEFORE speaking to your funds manager.
DAvid
May 6th, 2008 @ 5:14 pm
57. Irene
Hi,
What happens if I file late? Does the HBP repayment still apply or does it become taxable as income?
May 13th, 2008 @ 3:22 pm
58. John
Hi Irene,
If you file late, the HBP doesn’t become taxable assuming you have the RSP deductions to offset the mininum repayment amount. However, if you owe money under the HBP, CRA may send a request for you to file your return.
May 17th, 2008 @ 5:18 pm
59. leo
i have no rrsp acc, and never did contribution on rrsp,
can i make the hbp done???
…maybe bad question…
May 22nd, 2008 @ 1:13 pm
60. Traciatim
Leo, the HBP allows people who have funds in an RRSP to withdraw them without a tax penalty. If you have no RRSP then you can not participate in the HBP.
What you can do however is open an RRSP account, deposit 20000 in to it, and 90 days later withdraw those funds under the HBP. is you are taxed at 30% or so, this would give you a 6000 tax refund for your new home. Of course, you then need to put 20000 back in to an RRSP over the next 15 years. This may be something to talk over with a finance professional if you are saving for a home.
May 22nd, 2008 @ 7:27 pm
61. Reuben
I read through all the comments and found it very educative. Thanks to all you folks.
I still have a question: My RRSP contributin limit is $7000. My minimum HBP payment requirement is $1400. I contributed $16000 towards RRSP. Does it make sense to pay back the extra RRSP contribution (16000-7000-1400=7600) towards HBP? Or should I carry forward this extra RRSP contribution to the next year?
Jun 13th, 2008 @ 2:29 am
62. Traciatim
Reuben, to answer which is best there are far too many variables to play with. From the question it sounds like you only have 7000 in room but are putting in 16000. To avoid penalties you should use the HBP repayment to ensure you don’t go over your limit. Penalties are pretty harsh for overages.
If you have no limit problems in there, I guess it would depend on if you want the tax rebate now or in the future. If it were me I would take the rebate as quick as you can and use it to pay off other debt, or start a TFSA in 2009 . . . but either way I think it’s more of a personal preference. Sometimes it’s nicer to know you aren’t obligated as much to do HBP repayment in the future.
Jun 13th, 2008 @ 12:59 pm
63. VietRider
Hi there! I have 2 questions:
If a person’s owning a house that inheritaged from his parents, would he/she qualify for HBP?
Second question is if someone borrowed 20k HBP for his first house long time ago and he sold that house 5 years ago and still owing 10k on the HBP. Can he be qualified to borrow again and how much?
Thanks
Nov 17th, 2008 @ 1:45 am
64. nobleea
VietRider;
Don’t quote me, but I believe the HBP applies if you have not owned a home in the past X years (I think it’s 10). Notice it says ‘owned’ and not ‘bought’.
You can do the HBP several times, but you can’t have owned a home for 5-10 years previously (not sure what it is) and the HBP balance from previous withdrawals has to be zero. So you couldn’t do the HBP again until the balance owing was 0.
Nov 17th, 2008 @ 2:26 am
65. LD
Hi everyone, from what I read, maybe I am not understanding this correctly, when you make a HBP repayment it is not tax deductible. So wouldn’t it be better not to make any repayments and include the 1/15 payment as taxable income each year to avoid double tax later. For example, if I have $20K in RSP that I have already received a tax deduction for, basically 20K is untaxed. Then I take that $20K for the HBP. When I make repayments, lets say $1400 per year with money that I have to pay tax on. Then when the original $20K is paid back and later down the road I withdraw the RSP I have to pay additional taxes on it. Isn’t that being double taxed. You would be taxed on the repayment money and the withdrawal later. Would it be better to make no repayments and just pay the tax once? I am just trying to see if it is worth while doing the HBP, I have already bought 20K worth of RSP to get the ~6K tax refund for an extra down payment but don’t want to get double taxed down the road.
Nov 18th, 2008 @ 5:04 pm
66. nobleea
LD;
Yes, that is the common thinking. All your are getting out of it is an interest free loan of future tax refunds from the RRSP contributions you would make. But an interest free loan is a good deal anyday, especially when it’s spread over 15 (really 16 or 17) years.
Nov 18th, 2008 @ 5:22 pm
67. LD
nobleea;
If this is the case, why would anyone want to make repayments to the HBP? You are just being taxed twice which is not good. What if you don’t make any repayments and incur the 1/15 repayment as taxable income for that year and then use the money you would of used for the repayment to make a new RSP contribution which you would get a tax deduction for. After 15 or so years you would have the same amount in RSP and avoid the double taxation. Does anyone know if this is possible and of any benefit? I think we already pay enough taxes as it is. LOL.
Nov 18th, 2008 @ 5:37 pm
68. nobleea
LD, you are not being taxed twice. Remember that the first time the 20K went in to the RRSP, you got a refund, essentially making that money tax free.
Some people might make the repayments earlier if they expect their income to rise significantly over the 15 years.
Nov 18th, 2008 @ 5:45 pm
69. LD
nobleea, are you sure you are not getting taxed twice? Take the scenarios below:
Scenario One: You buy 20K worth of RSP and get a tax refund which makes the 20K tax free. You then retire sometime in the future and withdraw the 20K at which time you get taxed on it. Which means you paid tax once on the original 20K.
Scenario Two: You buy 20K worth of RSP and get a tax refund which makes the 20K tax free. You use the 20K towards the HBP and have to make repayments every year for lets say 1400. If I understand this right, you cannot deduct the 1400 from your income so you are actually paying tax on the repayment amount of 1400. Lets say you need 1800 in net income to gross your 1400 repayment amount. You pay off the initial 20K. You then retire sometime in the future and withdraw the 20K at which time you get taxed on it. Which means you paid tax twice on the original 20K. Tax on the repayments and tax on the withdrawal in the future.
I don’t mean to be a pest but I just trying to better understand how the HBP works before committing to anything. If Scenario Two is correct in how the program works. I don’t see much benefit for those who already have the 20K other than getting an additional 6K for a down payment initially from the tax refund. Is my logic wrong here? Basically, what I am trying to verify is, do you get a tax refund on the repayment amount?
Nov 18th, 2008 @ 6:56 pm
70. nobleea
If you don’t make repayments to your HBP and they just tack 1/15th of 20K on to your income what you have essentially done is withdraw money from your RRSP. You can do this at any time, no HBP required, however they will tax ALL of it that year. What you are suggesting is taking the tax hit spread out.
So if you add it to your income you are NOT repaying your RRSP. You are repaying the government the tax refund they gave you when you first contributed to the RRSP.
If you just have them tack it on to your income for the year, at the end of 15 years, you will have paid back 0$ to your RRSP.
Nov 18th, 2008 @ 7:05 pm
71. John
LD: I withdrew RSP funds under the HBP. There were two years I made no RSP contributions and therefore the minimum HBP amount became taxable as income (see #54); but the remaining balance was not reduced by this amount (and called CRA to verify).
I suspect if you skipped the $1400 mininum HBP payment; this amount would become taxable as income each year. And at the end of the 15 years, you would still owe $20,000 repayable under the HBP. You’d lose $20,000 in tax deductions you’ve already paid the taxes on? Hence my double taxation comment (and has been my experience…).
Nov 18th, 2008 @ 7:07 pm
72. Alan
This is a great thread. Are we suppose to open a new RRSP account for the HBP repayment? Wouldn’t this simplify things?
The only problem with opening a separate account is the additional administration fee that financial institutions charge yearly if the RRSP balance is below a certain threshold.
Nov 19th, 2008 @ 1:48 pm
73. nobleea
You could open a new account for it. But what I think most people do is just associate a portion of their RRSP contributions for the year to the HBP payback. For example, if you contributed $8K through work to an rrsp, you get an RRSP slip that says so. On your income tax form you put down $1500 on the HBP payback line and $6500 on the RRSP contribution line.
Nov 19th, 2008 @ 1:54 pm
74. Pierre Frenette
I purchased a home with HBP, with 20k downpayment.
When I payback the HBP does the RRSP that was held by say RBC, does this become re-activated and start to make dividends.
Does the bank notify me of this?
Should I be contacting the bank after its payed back?
Dec 1st, 2008 @ 12:41 pm
75. Saro
As a potential home buyer, I am looking to use the HBP to finance the down payment like a lot of folks out there and I have been interested to see the benefits of repaying earlier than the allotted 15 years versus making lump sum prepayments towards the mortgage. I’m glad that I stumbled upon this thread (or conversation) which has broadened my views. It is lovely to encounter people who share, inform, and help one another.
Cheers,
Saro
Dec 6th, 2008 @ 7:48 pm
76. Ashleah
Does the First Time homebuyer requirement still remain?
Dec 17th, 2008 @ 6:28 pm
77. FrugalTrader
Ashleah, as far as I know, the rules for the HBP still stand.
Dec 17th, 2008 @ 6:40 pm
78. David
Hi Ashleah,
yes, the HBP is still in effect (employed it for my first home purchase this year!)
See the link for the details:
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/menu-eng.html
- David
Dec 20th, 2008 @ 12:46 am
79. David
Here is something I found interesting from the CRA website:
“Even if you declare bankruptcy you still have to make the annual repayment to your RRSPs for each year remaining in your HBP participation period, until all amounts withdrawn under the HBP is repaid”
And I saw some questions regarding repayment terms. Looking through the CRA website, I found out that:
ANY amount you designate towards the HBP (which requires a separate form) does not affect in any way your regular RRSP contribution limit. You can even contribute before the grace period ends – it just means what is required per year will be less (new balance/15 years). If you over contribute to your HBP, it does NOT mean you have to pay it down faster. It just means what you are required to pay back per year is now less (remaining balance/years remaining).
Of course, it is your decision if you want to pay back the HBP faster since you have already received the tax benefit.
Since I have another year before my payback period begins, I believe I will balance my monies tagged HBP and those toward my RRSP contribution limit (since I may want more or less tax benefit for that tax return). However, I agree with others who generally agree to pay down the HBP much faster than the 15 years allowed.
Dec 20th, 2008 @ 12:58 am
80. JRH
With the bad market out there what amount am I allowed to withdraw for the HBP the current market value or the book vaule I have invested over the years. As with some RRSP and most people out there we have lost quite a bit of our savings. I have gotten a few different answers so any help would be great.
Jan 2nd, 2009 @ 12:02 pm
81. Traciatim
As far as I was aware JRH, the dollars coming from your RRSP under the HBP are simply measured in physical dollars and have nothing to do with the purchase price/value of the underlying asset.
Jan 2nd, 2009 @ 1:47 pm
82. JRH
Thanks,
I currently have a book value of $14000 the current market value is $9000. I was going to put $6000 into RRSP to help with taxes and bring the amount that I will take in HBP to $20K. but the lady at the bank said I would need 11k as the market value is currenlty 9k.
I agree and belive she is wrong. But wanted to check things out. Also she was recomending money market funds to keep the money secure. If I am able to with draw on Book value wounldnt it make sense to purchase funds at lower rate to make larger increases in the years ahead. If so I think I will call her boss and report her.
Jan 2nd, 2009 @ 2:29 pm
83. DAvid
You can’t sell something you don’t have. The value of your RRSP is only $9000, not the $14,000 book (purchase) value, thus you would need to deposit an additional $11,000 to have $20,000 to withdraw.
Just now a lot of folks (myself included) would love to cash their portfolio for the book value, however that’s dreaming in Technicolor!
In an RRSP, book value has little meaning, as you can’t claim a capital loss as you can with a non-registered portfolio.
I suggest you do a bit more research before you call the banker’s boss.
DAvid
Jan 2nd, 2009 @ 8:55 pm
84. FrugalTrader
JRH,
DAvid is correct. The value of your account is your market value not book value. Equities over the past year have taken a beating and you are not the only one to take some losses.
The lady at the bank is correct, if you need the money soon, your money should be in something less volatile like money market funds.
Jan 2nd, 2009 @ 10:12 pm
85. Traciatim
JRH, yes I agree with David and FrugalTrader. The current market value is what you will get for the assets if you sold them. That means the current value of your assets are 9000, so if you want to get the full 20K out and make a deposit to get up to that amount you would put in 11K.
Keep in mind that any deposit must be in the RRSP for 90 days if I’m not mistaken before it can be withdrawn from the RRSP, but you can get all those details off of the CRA website, they have a pamphlet available in PDF that explains all the ins and outs.
Jan 3rd, 2009 @ 1:03 am
87. Peter
Hi,
At this point I don’t have RRSP. I would like to find out if I could contribute let say $20K to spousal RRSP and $10K to my RRSP and have my wife withdraw $20K and myself $10K for HBP (90 days later)?
I am also assuming that I could claim $30K RRSP reduction on my tax return.
Thank you for the input.
Peter
Jan 7th, 2009 @ 2:51 pm
88. Traciatim
Peter, you could do that plan if you had more time. If I’m not mistaken (I’m no professional) normal attribution rules apply even during the HBP, which would mean you would have to wait 3 years or the withdrawal would be in your name as a regular RRSP withdrawal thus negating the whole point.
You can however contribute 20K to an RRSP in your own name, get the tax deduction, wait 90 days and use the HBP increasing your available funds to buy the house however, so it’s not a complete loss.
Jan 7th, 2009 @ 3:01 pm
89. cannon_fodder
Peter,
Does your wife have $10k in contribution room? If so, she could make that contribution on her own while you put $20k into your RRSP.
Jan 7th, 2009 @ 5:12 pm
90. canucktuary
Wondering if it is worth it to contribute to RRSP now to use for HBP in 18 months or to hold off on contributions to RRSP until in a higher tax bracket and pay for downpayment using funds in non-registered account.
Current marginal tax rate is 31.15%, and I’m just over the limit. Highest marginal tax bracket is 40.16% – which is an extra 9%.
Jan 7th, 2009 @ 7:15 pm
92. Janelle
I have a question regarding using my RRSP over contribution as a repayment to my Home Buyers Payment Plan.
In 2002 I purchased $31K that went directly to my RRSP. The main reason behind this contribution was for the purpose of wthdrawing 20K through the Home Buyers Payment Plan.
My RRSP contribution limit for 2002 was 14K.
Now with the 31K contribution, I deducted the 14K as that was what my limit was, which left me with an over contribution of 17K, less the 2K allowable over contribution threshold.
Can this unused over contribution be used to repay my HBP and when?
Jan 15th, 2009 @ 2:29 pm
93. nobleea
Janelle;
No, I don’t believe you can use your overcontribution to repay the HBP. Or you could, but you’d still be paying the monthly penalties on your overcontribution amount. on 17K, that’s got to be a lot of money. However, if you had the overcontribution in 2002, you’ll have to have paid a lot in penalties so far. Did you actually claim the full amount on your income tax, or just the maximum contribution amount?
Jan 15th, 2009 @ 3:15 pm
94. Janelle
I just claimed the maximum amount of 14K
So I would be penalized on 15K for one full year and then I used an additional 3200 as that was my limit for 2003. So can I then put the difference of 11,800 towards my HBP repayment then? That’s taking into account for the allowable overage of 2K.
Jan 16th, 2009 @ 12:59 pm
96. LDJ
What happens to the assets in your RRSP when you withdraw the 20K?
I manage my RRSP portfolio pretty actively and generate anywhere from 10 to 150% returns depending on how good my year is. Does the bank liquidate all my assets or do I still have control over them?
Of course the TFSP is a better way to manage funds now, but the question still lingers… what happens to the assets in your RRSP?
It appears to me that you lose all control over them in exchange for getting the HBP payout. I can’t find this mentioned anywhere.
Jan 27th, 2009 @ 10:24 pm
97. nobleea
LDJ;
what do you mean what happens to the assets?
say you have a bunch of stocks. you sell 20K worth of them. and withdraw the money as cash under the HBP. it’s not a payout. it’s a loan from your rrsp. it has to get repaid. if you have more than 20K in your rrsp, you only need to sell 20K of them. the rest you can play with.
Jan 28th, 2009 @ 1:11 am
98. Kenny C
As a prospective 1st time home buyer in 2009, I would love to take advantage of this but I cannot. I contribute into my RRSP’s through my company who uses Sun Life to manage it. Unfortunately, according to HR and the Sun Life reps, they do not utilize the HBP. I have still never received a straight answer as to why except them saying “It wasn’t set up that way and cannot be changed”.
That $10k I have in there would sure come in handy with my other savings to put towards a home.
Jan 28th, 2009 @ 5:30 pm
99. David P
Hello.
I want to buy a condo this year but I never contributed to any RRSP.
I don’t have much in savings, about $6k.
My bank suggested to borrow money towards my RRSP and take advantage of the tax return then leave the money 90 days and withdraw the money for my downpayment.
I believe I have plenty of room to contribute but not sure if I should do it and how much ?
I’m a bit overwhelmed on knowing that I have to pay back my bank loan, pay back the HBP and start paying a mortgage. Should I pay the bank loan as fast as possible and then start paying back the HBP ?
Please advise if this is worth it?
thank you
Feb 6th, 2009 @ 11:13 pm
100. Traciatim
I’m not sure I would use an RRSP loan to get the money in and then withdraw it under the HBP and then have the obligation to pay all the things back. It could be useful though.
If you have 6K in savings though, you could simply take that, put it in any old RRSP, file your taxes and take the deduction in income (if your marginal rate is 30% you would get an extra 1800 off of your tax bill). Then wait the 90 days and take the 6000 out under the HBP, leaving you with 7800 to buy your house. Plus an obligation to put money in to an RRSP in the future.
It might be worth it to you to take out a loan and do the same thing, it really is a personal preference. Say for instance you borrow 10000, and add your 6000 and put that in any old RRSP. This would reduce your income this year by 16000. Depending on your income this makes you get taxes back, I’ll use the same 30% example, your tax bill would be reduced by 4800 bucks. Then you wait 90 days and take the 16000 back out leaving you with 20800 to buy a house . . . . but you take the 10000 (and some interest) and pay back the loan to avoid a monthly payment, and you have 10800 to buy a house, plus you are obligated to contribute to an RRSP in the future or pay tax on it as income.
Also, I’m pretty sure I have this correct, but if you buy a home in 2009 you are eligible for a 5000 non refundable credit that will be worth an additional 750 reduction in your 2009 taxes for when you file them in 2010.
You could also use the Home Renovation Tax Credit in 2009 if you buy a home that needs a little work. So if you use the last scenario I went through and used your original 6000 to get in to a home, and also used the extra 4800 to replace some windows or re-insulate or something, then you’d be eligible for the HRTC that would be worth a credit of 3800 (4800 – 1000) or a reduction of your tax ill this year of $570 for a total reduction of $1320.
Please remember, all of these figures depend on your income, your contribution room, your timing (since we don’t have much time to get money in an RRSP left for the 2008 tax year) . . .
It looks like your options are:
1) Use 6000 to buy a house
2) Use 7800 to buy a house with an obligation to put 6000 in to an RRSP spread over the next 15 years
3) Use 10800 to buy a house with an obligation to put 16000 in to an RRSP spread over the next 15 years (depending on how much you borrow of course).
4) Put the 6000 in an RRSP, take the tax refund and put that in an RRSP, save as much as you can until next year, and repeat and buy a house next year . . . or later.
All this already assumes that you’ll have an emergency fund once you are in the house and are ready for the types of obligations that a house comes with. If the only savings you have is the 6000, I would put $5000 in a TFSA, $1000 away in a taxable account, and start saving. Keep that 5000 in case something pops up in your new home once you get there and wait a while until you have more money.
See, like I said, too many options, and a lot of it is personal preference.
Feb 8th, 2009 @ 1:58 pm
101. Mitnik
According to the CRA website the RRSP limit is still 20,000. When they will update to the new 25,000 limit?
Feb 17th, 2009 @ 3:12 pm
102. OBK
We are closing on our house on 27 Feb 2009. I was happy to hear that the withdrawal limit was increased to $25K at the last budget announcement, but then was told by my financial advisor handling the withdrawal that I could still only take out $20K at closing because the budget has not yet reached Royal Assent. However, the budget states that anyone purchasing a house after 27 Jan 2009 can pull out the new $25K limit, which means we should qualify for the increase. Once the budget attains Royal Assent, will I then be able to pull out the additional $5K under the HBP sort of retroactively since we’ll have already closed? Any insights would be appreciated, thanks in advance!
Feb 21st, 2009 @ 10:02 pm
103. dani
hi i have already purshased my first home which i sold last year…since then i have bought 10 k of rrsp …can i use this rrsp to purchase another house..on the other side i just got married and my wife havent bought a house yet what shoud i do…??
Mar 1st, 2009 @ 1:26 am
104. FrugalTrader
dani, since you’ve already purchased your first home, you do not qualify for the HBP again. However, if your wife can withdraw from her RRSP under the HBP.
Mar 1st, 2009 @ 8:28 am
106. corpusj
When you borrow through HBP, do you actually get a cheque from the bank for the borrowed amount?
Mar 24th, 2009 @ 11:21 am
107. Traciatim
corpusj, that’s how mine worked, yes. I’m sure direct deposit could be arranged. It’s just like any other withdrawal from an investment account.
Mar 25th, 2009 @ 4:51 pm
108. Homee
Does the HBP only apply to homes that are already built? There is a time clause in which you need to intend to occupy the home within a year. Does this mean I can’t use the HBP withdrawal money at the early deposit phase of a home in the “presale” stage (with the home scheduled to be complete in 3 years)?
Mar 26th, 2009 @ 8:01 am
109. Traciatim
Homee, I’m not sure if you can use it in the deposit stage that far ahead, but their are some interesting rules in there. You may want to give the CRA a call and ask them with specifics for your situation. In the example they give on http://tinyurl.com/cg8xa8 a person spans two years (Feb 2006 for the offer to buy, and HBP withdrawal . . . buyer gets home in May 2008) in a similar example to yours.
In fact, you are also said to meet the deadline if:
“Before October 1 of the year following the year of the withdrawal, you paid an amount at least equal to the total of your withdrawals under the HBP to the contractors or suppliers (with whom you deal at arm’s length) for materials for the home being built or towards its construction.”
If the CRA says your situation doesn’t qualify, just ask the builder to give you a receipt that states “Homeowner Deposit for Materials” . . . or something along that line.
If none of that pans out, you could also talk to your banker and ask if they would provide a bridge loan up to the point you are eligible for the HBP withdrawal. Banks like lending money to people who already have enough money :)
Mar 26th, 2009 @ 6:19 pm
110. Ana
Hello ,
I have got a question. The possession date will be 29 April 29. I can withdraw 3000$ from my RRSP right now but I can take out the rest in july . Will I stil be eligible to use HBP in July?
Apr 6th, 2009 @ 3:29 am
111. Pete
can someone explain how the RSP flip loan works?
ie; I borrow 10,000 from the bank, invest in my RSP, claim the tax deduction, and wait 90 days. then I withdraw the 10,000 from my RSP under the HBP. I now have 10,000 + approx 3,000, but I owe the bank 10,000. Doesn’t the HBP care that my RSP withdrawl is going to pay down my previous debt, rather than being used for a mortgage?
thanks
Apr 7th, 2009 @ 8:54 pm
112. nobleea
Pete
You have the math correct.
the main condition for the HBP is that you are a first time home buyer. They don’t care what you use the money for. It could be downpayment, upgrades, renovations, furniture, home theater, travel, whatever you want. There is no requirement to prove that you spent that specific money on the house. The only requirement is proof that you actually did buy the home.
The HBP is not specifically for home buyers with mortgages. If you had the whole house amount saved up, you could still do the HBP and blow the money on campy furniture. Its designed to help with the downpayment, but there is no requirement that that’s what you spend the monies on.
Apr 7th, 2009 @ 9:04 pm
113. JC
Does anyone know the answer to this?
My boyfriend and I are planning to buy a home. He is a first time home buyer and plans to use his RRSPs for the purchase. I am not a first time home buyer and I do not plan to use RRSPs. If we both go on title (mortgage and deed), does he still qualify as a first time homebuyer?
Thanks
Apr 8th, 2009 @ 3:55 am
114. Uniqua
Hi,
I have a question for my own personal circumstances. I have been putting money into my RRSP for the HBP for several years now as I purchased a condo in 2007. I only put an initial 5% downpayment, not using the HBP. Initially, I had intended to use it as a principal residence and was a Canadian resident at the time of the downpayment. (The original advertised completion dates had been stated for Spring 2008 by the builder).However, the move-in date has been delayed until about spring 2010 and closing dates scheduled for 2011. At what point will I need/be able to withdraw from the HBP?
Additionally, I am currently looking to move overseas for work and might not be back in time to satisfy all the HBP criteria. If I end up using this condo as a rental income property while I am overseas (without ever using it as a principal residence), would a following home purchase no longer qualify me as a first-time home buyer, even if it does become my principal residence and I am a Canadian resident at that time?
I’m hoping someone on this site can help! Thanks
Apr 28th, 2009 @ 5:05 pm
115. nobleea
Uniqua,
An interesting situation. I think owning a rental property that you have never occupied does not preclude you from being a first time home buyer.
so if you did not use the HBP on this condo and rented it out from the getgo, then I think you could do the HBP at a future time.
Apr 28th, 2009 @ 5:13 pm
116. Garp
If you have owned a property of permanent residence overseas in the last five years, does this affect your eligibility for first time buyer? Or is it only Canadian property?
Apr 28th, 2009 @ 9:58 pm
118. KC
Can someone please provide an answer to this scenario:
I am looking at buying a home (new build) this year. Closing/Possession date for the build is scheduled for October 2009. I have a RRSP contribution room for the year 0f about $10,000. I have been placing money into my RRSP this year with the purpose of maxing out my contribution room for 2009. Is it possible for me to close on this property (by using a loan to pay up my downpayment) and then withdraw from my RRSP come March/April 2010 suing the HBP to then pay off the loan?
In short terms, my question is: is it possible to possess a home this year and then use the HBP to withdraw from the RRSP early next year to pay off a loan used in providing downpayment for the home purchased this year (2009)?
May 6th, 2009 @ 1:44 am
119. nobleea
KC;
No. I believe you can only withdraw from the HBP no more than 30 days after taking posession.
May 6th, 2009 @ 2:52 am
120. dave b
If I need funds and need to withdraw from my RSP even though I owe in my HBP, can I. Does it affect my payback period?
May 7th, 2009 @ 10:49 am
121. Traciatim
Dave B, as far as I was aware there would be no effect on your HBP. You would still need to make a new contribution and allocate it to the HBP on your tax forms or you will have to declare that as income and pay tax on it.
May 7th, 2009 @ 10:59 am
122. Ron
Does the whole sum have to be used towards the down payment, or can I use a portion towards closing costs as well?
May 19th, 2009 @ 9:04 pm
123. nobleea
Ron, you can use the funds on whatever you want. Xbox games, McDonalds, trips to Kazahkstan, furniture, or even practical things like lawyer fees or downpayments.
May 19th, 2009 @ 10:35 pm
124. Traciatim
Ron, Nobleea beat my too it I guess, I was going to come on and say you could buy a car with it if you wanted to (even if that’s not a very responsible thing to do with retirement funds). If you qualify for the withdrawal under the program they really don’t care what you do with the money.
May 20th, 2009 @ 9:29 am
125. Ron
Thanks for the info everyone. I’m going to kazahkstan!
May 20th, 2009 @ 7:34 pm
126. Ms Save Money
Ron,
Curious – why are u going to kazahkstan? – oil?
May 21st, 2009 @ 3:43 am
127. Matthew Chiu
I’ve got a problem and was wondering if anyone has had this issue before.
I took out my 20K in 2006 and didn;t realive the condo had to be done by the OCT of the next year, (my mistake).
My condo closes in Dec 2008
Therefore CCRA is considering it a withdrawal from my RRSP and went back to 2006 and is charging me the taxes and interest.
I called them up to see if I could put the money back in or something.
They told me to appeal and see what happens.
Your help would be appreciated
Jun 1st, 2009 @ 4:38 pm
129. Dey
Hi I hope that someone could help me:
I withdrew my RRSPs for my first home buyer and things have changed quite a bit for me financially and no longer can use my condo as a primary resident. I will be renting my unit out instead, however, withdrew my RRSPs for that reason.
Will I be penalized for it or can now I use it to put towards my down payment instead?
Please advise…
Dey
Jun 9th, 2009 @ 6:14 pm
130. FrugalTrader
Dey, AFAIK, as long as it’s your first home purchase, you can use the HBP for a rental property as well.
Others have stated above that as long as you qualify for the program (HBP), you can use the funds for whatever you please.
Jun 9th, 2009 @ 7:54 pm
131. Traciatim
Dey and FT, I think you are only eligible for the HBP if:
“You intend to occupy the qualifying home as your principal place of residence.”
This one is a little tricky because the key word is intend. At the time of the withdrawal that was the intent, but I wouldn’t count on the CRA seeing the situation that way. Call the CRA, write down the date, time and person you speak to and ask about your situation. They will be happy to help. You may need to simply fill out another form and put your HBP withdrawal back, or keep it out and pay your income tax on it like a regular withdrawal.
Jun 9th, 2009 @ 8:59 pm
132. TM
hello,
forgive me if this question has already been answered.
How does the RSP withdrawal actually occur? For example, I have my RSP tied up in various mutual funds through Scotia Itrade. What do I do after I sell the required amount (25000 in my case) and convert it all to cash?…How do I take this out to beused as a down payment?
I would highly appreciate it if anyone can help we with this.
thanks,
TM
Jun 13th, 2009 @ 11:51 am
133. chris
- question
My partner and I have $21000 each ($42,000 total) in our RRSPs to use under the HBP for a house, we are closing Sept 1 this year, and are putting a total of $36,000 down that date. Now that we have a written offer to purchase, we can start withdrawing the funds that have been in for over 90 days. Can we take $3000 out under the HBP, and contribute back into our RRSP along with another $1000 each later this month, and be able to withdraw this last $8000 90 days from then (this would still be within the 30 days of our closing date).
We both have unused contribution room, and we have some upgrades we would like to do that would be eligible under the tax rebate for home renovations this year.
Jun 18th, 2009 @ 9:30 pm
134. Andrew
Simple question,
Is one still eligible for the HBP if their only intention is to own the property for rental? Also, would they qualify for the first time home buyer tax break? Any insight would be appreciated.
- Andrew
Jun 22nd, 2009 @ 2:13 pm
135. nobleea
Andrew,
No. There has to be intent to make it your primary residence I believe.
Jun 22nd, 2009 @ 2:28 pm
136. nobleea
chris;
I believe you can only do the HBP withdrawal in a single transaction.
perhaps look at loaning the 3K each(or whatever it takes to be able to max out the HBP) you were going to take out in the first withdrawal and then pay it back when you take it all out 90 days later. you get the tax refund which should more than cover the interest and fees you pay on a small 3K loan
you, of course, have to pay it back over the next 15 years. but it is essentially an interest free loan.
Jun 22nd, 2009 @ 2:31 pm
137. dlm
CRA told me the $20,000 had to be repaid over 15 years, not sooner. It seems that’s wrong. I discovered you can ask the CRA for their name and ID number — and they seem to be more careful with their answers.
The HBP is not a free loan since you lose the interest.
We each took $20,000 from RRSP for a house in 2005 which we sold in 2006.
We are now retiring and still owe about 13 payments and have to consider lower income, CPP and OAS implications as well GIS and GST. It might have been better to leave the money in RRSPs. I think it’s necessary to repay before age 71 and roll into a RIF. Income tax is mindboggling with pension credit, age credit and transfers. Any suggestions?
Jul 4th, 2009 @ 9:03 pm
138. Traciatim
DLM, Hire a professional. Once it gets to complicated that the answers aren’t coming to you, it’s time to get help.
Jul 8th, 2009 @ 10:33 am
139. dlm
how would you recommend finding an advisor? we’re in Victoria and tried one financial advisor who turned out to be an expensive ditherer.
Jul 8th, 2009 @ 12:51 pm
141. Johnny
I placed the order on July 1st and request the redraw of HBP on July 15, however, the standardlife now sent out the check (even though I had a direct deposite setup) today on July 22 from Montreal. I am concerning if the money can be used in time for the closing day, July 31st.
I have enough money to close the deal but just wondering if the HBP money come later than my closing day, do I need to do anything to prove the HBP money is spent on my downpayment?
Thanks,
Jul 22nd, 2009 @ 12:49 pm
142. lencurrie
Hey All,
I have a question which I don’t think has been fielded yet.. I was able to withdraw using my RRSP’s into the HBP. And I am now in year 4 of paying it back I believe.
My question is, as I’m paying it back.. what is that money doing? I see it when I log into myfile or whatever the gov’t of Canada website is, however once I’m done paying it off in 15 years.. do I get a cheque? Does it go back to my RRSP account? I’m a little confused.. I’ve already saved the money.. and spent it on the house.. now I have to pay it back, so where is it going?
Thanks.
Len
Jul 22nd, 2009 @ 6:13 pm
143. lencurrie
Sorry for the double post.. corrected website in my name.
Thanks for the great site mdj!
Jul 22nd, 2009 @ 6:16 pm
145. Len Currie
Well I figured it out.. explained on my site.. (since it also explains my stupidity).
Sorry to have posted here.. it was sort of silly when I think about it.
http://www.lencurrie.com/2009/07/home-buyers-plan-finally-figured-this-out/
Jul 27th, 2009 @ 1:06 pm
146. Jimmy
9 years ago I withdrew $20k under the HBP program and forgot all about repaying the funds back to my RRSP probably because I was never sent a notice. I still have not repayed anything, although I have contributed ~3k each year back into RRSP’s since I initially withdrew the funds but not specifically directed to the HBP program.
My question is, This past year I over-contributed into RRSP’s and now would like to know if I can direct any of the over-contribution towards repaying the HBP
Thanks
Jimmy
Jul 29th, 2009 @ 1:23 am
147. Len Currie
@ Jimmy:
I don’t believe you get a ‘notice of repayment’, it’s just in your tax package every year it designates your repayment amount. So if you contributed $3000 to your RRSP.. there is a section in your Schedule 1A or whatever that would read ‘how much you’d like to designate to HBP repayment’.
I’m almost positive you can over-pay your RRSP and repay that way.. yes.
The thing is, is that you are not REQUIRED to pay back the RRSP.. ie: they’re not going to check that you have an RRSP with money in it.. but the thing is, you’ve paid tax on it for 7 years since the initial withdrawal, so it’s just like you withdrew the RRSP’s originally and didn’t even use the tax benefit of the HBP. Kinda like people whom cash in their RRSP’s early and buy something else.. the taxes they pay on it are huge.
Give you an example.. Last year my repayment amount was $486 (same every year I believe) and if I didn’t designate any money repaid this year (I don’t have any RRSP’s) my refund was going to be 2,501.37.. however once I put in the $486 designated as hbp repayment.. the refund went down to 2,327.38. A difference of 173.99.. which (x15) would be 2609.85.. OR the amount that I would have had to pay in taxes if I just took out the RRSP’s and didn’t use HBP.
So.. getting back to your question, there is a line which states “Amount of RRSP contributions designated as your 2008 HBP repayment” and you could certainly put your amount in there that you overpaid since you’re not getting the tax benefit anyways. (It doesn’t change anything, but it allows you to replenish your RRSP tax free)
Hope that helps.
Jul 29th, 2009 @ 9:26 am
148. Jimmy
Thanks for the response Len, I will direct my RRSP overcontribution monies towards the HBP if there is no limit. As for my HBP, I think my situation is different. I have never paid taxes on the initial $20k that was withdrawn from my RRSP. So when I start repaying will I not reduce my RRSP contribution headroom.
Jimmy
Jul 30th, 2009 @ 2:01 am
149. Abe
Hello guys! All your responses are really helpful. I am a first time home buyer and currently have no RRSP set up. In order to make a decent down payment towards my first home, I am signing up for RRSP soon. My question is:
a) How long do I need to wait before I can get $25k towards my downpayment?
b) Secondly, at the moment I haven’t been able to put in any money into RRSP yet, will the banks still loan me the money and I can give it back on yearly basis?
I am fairly new to this concept so any help would be appreciated!
Thanks!
Jul 30th, 2009 @ 4:46 pm
150. Len Currie
Abe:
I think you’re confused on something.. with the HBP, you are using money that you’ve already put into an RRSP. So to answer a), you would need to wait until you contributed 25K to withdraw it. As far as contributing to an RRSP, the banks are usually more than willing to lend you money (since they get the interest) as long as your credit is good.
Jul 30th, 2009 @ 4:53 pm
151. Mike
Hi everyone,
I see that JC posted the same question that I would like to resolve. My girlfriend is not a first time home buyer, but I am. I assume that I can use my full amount, but what is the limit to the value of the house? The rules state that $450k is the max, but does it change if two people are involved?
$450k doesn’t buy you too much in Victoria!
thanks,
Mike
Aug 25th, 2009 @ 5:00 pm
152. rami
Hi
“”“You are not considered a first-time home buyer if you or your spouse or common-law partner owned a home that you occupied as your principal place of residence during the period beginning January 1 of the fourth year before the year of withdrawal and ending 31 days before your withdrawal.
You have to meet this condition at the time you withdraw an amount from your RRSPs under the HBP.”
We have a house,primary residence.It solely in my wife ’s name.Can i be considered a first time buyer,if I purchase another property(under my name only) using the HBP?
Thanx
Sep 17th, 2009 @ 10:07 am
153. FrugalTrader
Rami, as far as I know, if you are not on title of your current property and have never owned property, you “should” qualify for HBP. Best to consult your banker/broker.
Sep 17th, 2009 @ 1:43 pm
155. CS
Hello,
My husband and I owned a home in Denver Colorado that was our primary residence which we sold in June 2007. We moved to Canada immediately after selling the house and have been renting ever since. Do we still qualify as a first-time home buyer for the HBP?
Oct 31st, 2009 @ 3:19 pm
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