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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)





273 Comments, Comment or Ping

  1. 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.

  2. 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.

  3. 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

  4. 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?

  5. 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.

  6. 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.

  7. 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.

  8. 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!! :)

  9. 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.

  10. 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.

  11. 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.

  12. 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.

  13. 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

  14. sam – good point.

    Mike

  15. 18. rob

    pay off HBP , can i borrow again

  16. 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.

  17. 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.

  18. 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)

  19. 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?

  20. 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.

  21. 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?

  22. 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?

  23. 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.

  24. 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?

  25. 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?

  26. 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).

  27. 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.

  28. 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…

  29. 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!

  30. 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.

  31. 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.

  32. 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?

  33. 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

  34. 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

  35. 38. Traciatim

    David, I don’t believe that is correct. Source?

  36. 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

  37. 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

  38. 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

  39. 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???

  40. 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

  41. 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

  42. 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 :)

  43. 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.

  44. 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?

  45. 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.

  46. 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

  47. 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.

  48. 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!

  49. 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 ;)

  50. 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.

  51. 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…

  52. 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?

  53. 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

  54. 57. Irene

    Hi,

    What happens if I file late? Does the HBP repayment still apply or does it become taxable as income?

  55. 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.

  56. 59. leo

    i have no rrsp acc, and never did contribution on rrsp,

    can i make the hbp done???

    …maybe bad question…

  57. 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.

  58. 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?

  59. 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.

  60. 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

  61. 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.

  62. 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.

  63. 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.

  64. 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.

  65. 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.

  66. 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?

  67. 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.

  68. 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…).

  69. 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.

  70. 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.

  71. 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?

  72. 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

  73. 76. Ashleah

    Does the First Time homebuyer requirement still remain?

  74. Ashleah, as far as I know, the rules for the HBP still stand.

  75. 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

  76. 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.

  77. 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.

  78. 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.

  79. 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.

  80. 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

  81. 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.

  82. 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.

  83. 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

  84. 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.

  85. 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.

  86. 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%.

  87. 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?

  88. 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?

  89. 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.

  90. 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.

  91. 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.

  92. 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.

  93. 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

  94. 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.

  95. 101. Mitnik

    According to the CRA website the RRSP limit is still 20,000. When they will update to the new 25,000 limit?

  96. 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!

  97. 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…??

  98. 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.

  99. 106. corpusj

    When you borrow through HBP, do you actually get a cheque from the bank for the borrowed amount?

  100. 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.

  101. 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)?

  102. 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 :)

  103. 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?

  104. 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

  105. 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.

  106. 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

  107. 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

  108. 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.

  109. 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?

  110. 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)?

  111. 119. nobleea

    KC;

    No. I believe you can only withdraw from the HBP no more than 30 days after taking posession.

  112. 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?

  113. 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.

  114. 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?

  115. 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.

  116. 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.

  117. 125. Ron

    Thanks for the info everyone. I’m going to kazahkstan!

  118. Ron,

    Curious – why are u going to kazahkstan? – oil?

  119. 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

  120. 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

  121. 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.

  122. 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.

  123. 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

  124. 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.

  125. 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

  126. 135. nobleea

    Andrew,

    No. There has to be intent to make it your primary residence I believe.

  127. 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.

  128. 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?

  129. 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.

  130. 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.

  131. 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,

  132. 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

  133. 143. lencurrie

    Sorry for the double post.. corrected website in my name.

    Thanks for the great site mdj!

  134. 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/

  135. 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

  136. 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.

  137. 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

  138. 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!

  139. 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.

  140. 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

  141. 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

  142. 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.

  143. 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?

  144. 156. Josh

    In a previous post it was suggested that an rrsp could be collapsed to pay of the rrsp loan, after you have benefitted from the resultant tax refund. It was said the only cost would be the three months of interest on the loan. Is there no penalty for collapsing the rrsp?

  145. 157. FrugalTrader

    Josh, i’m not sure I understand your question. Collapsing an RRSP will result in tax payable for the year as it’s added to income.

  146. 158. cannon_fodder

    Josh,

    Maybe you are thinking of example where people boost their RRSP contribution by taking out an RRSP loan and then taking the tax refund to pay off the loan.

    Here is an example: you are in the 40% tax bracket and you have $10,000 contribution room but only $6k to contribute. You boost your RRSP contribution by borrowing another $4k at prime (usually you can get prime from a bank if you invest it at the bank). You contribution is now $10k which will net a $4k refund. You pay down the RRSP loan with your tax refund and the out of pocket cost is the interest on the RRSP loan. The loan could be paid off within 2 weeks if you contribute on Feb. 28 and use Efile to send in your tax return right away.

  147. 159. Josh

    Hi.
    Thanks for the quick response.This is the post and the context of “you withdraw the original 20k and pay off the bank loan. your only costs are the interest for three months”

    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.

  148. 160. JayC

    Quick question.

    Let’s say I withdrew $25K from my HBP but not eligible. I know that the CRA adds it as income which will be taxed.

    If I contribute the $25K back into RRSP will that negate the tax I would have to owe?

    Also would I be able to participate in the HBP again?

  149. 161. JayC

    Quick question.

    Let’s say I withdrew $25K from my HBP but find out that I’m not eligible. I already know that the CRA will add the $25K as income which will be taxed.

    If I contribute the $25K back into RRSP will that negate the tax I would have to owe?

    Also would I be able to participate in the HBP again?

  150. 162. mj

    Hi,

    sorry but i am a little dork about RRSP and HBP. Can someone give me advise on how to repay the HBP?
    I got an statement from revenue about the RRSP i borrowed and repay the HBP. What is the step by step procedure to start processing this?
    Please help me.. all the info. i get is much appreciated…

    Thank you

  151. 163. Brian

    Josh,

    I am a financial planner in Ontario and you are correct. If you invest the money into an RRSP, take the refund for downpayment purposes and then withdraw the RRSP to pay off the loan, then yes there is another cost that most ppl forget. The RRSP withdrawal is added as taxable income for the year it is withdrawn to pay the loan, and so it essentially eliminates the refund you received. For example, you invest 20K at a 40% tax bracket and receive an $8,000 refund. You use 8K for your home purchase and then when you take possession you sell the RRSP to pay off your loan. The problem comes when you file taxes next year. You’d better be prepared to pay that $8,000 tax liability owing!

    Secondly, for those who are taking there savings to invest, just to take it out under the HBP in 90 days, you might want to think this strategy through. Let’s suppose you do this in the lowest marginal tax bracket. You’re tax refund won’t be that much, and you’re simply taking back your own money out through the HBP… If you suspect you’ll be in a much larger tax bracket in the future due to increased earnings, think about this strategy and whether it makes sense. If the corresponding refund will help you avoid CMHC costs, then perhaps its worthwhile. But if you don’t need the refund or it would be more advantageous to take the refund in future years, then think twice before this strategy…

  152. 164. Brian

    Hi all, Brian again (planner in Ontario)…

    I had to reconfirm today some of the posts I read above about electing to NOT pay back into the HBP. Just so all know:

    If you do not pay back your yearly amount required to the HBP when it is payable, you report that year’s amount for tax purposes..

    For those who claim that your HBP balance isn’t reduced dollar-for-dollar by the amount you report for tax purposes, you are incorrect. You simply need to make sure you fill out schedule 7 (i believe I have the correct schedule) properly… When you add the HBP amount as income earned, make sure you do it properly. If the mistake was on your accountants end, I suggest changing accountants – as he or she clearly should not be manaing your personal tax affairs if this basic task can not be completed correctly!

    For those who made the mistake on your own, just pay the $40 bucks to have a professional do your basic tax return.

    –Brian

  153. 165. JC123

    I could use some advice on our situation, I’m getting nowhere fast with the major banks.

    I have taken out two RRSP loans, one for $8,000 for my own RRSP and one for $22,000 for my husband’s RRSP so that we can both have $25,000 for our upcoming home purchase.

    1 – Can we take the money out under the HBP if we haven’t entirely paid back the loans?

    2 – Is my husband eligible to take out $25K under the plan given that I am the contributor (I was clear with the bank that this was the whole point, I’ll be pretty upset with them if we can’t)

    3 – My husband has bad credit and there is a good chance that the entire mortgage will be under my name. Can we still use his RRSP’s for our deposit?

    Any advice would be greatly appreciated!

  154. 166. Shawn

    Hi all,
    Just a quick question. I am in the process of saving for a downpayment. I currently have about $7500. We are approaching the RRSP contribution deadline for 2009, and I am wondering, should I contribute all my savings to an RRSP money market fund, simply to get a tax break, with plans to withdraw the entire amount this summer to buy a home? What are the pros and cons, and do I lose out on any type of contribution room doing this? It seems like an easy way to snag an extra chunk of change for the downpayment. Also, I currently have zero dollars saved in an RRSP. I am 30 years old. How does this effect my decision, and is my situation common for someone my age? Thanks!

  155. 167. mandy

    I have a question, I borrowed from my HBP a few years ago but I don’t usually pay back into it and let them tax me on it come tax season (for right now as we have so many things we are paying for as new home buyers) the question is, If they tax me on the specific amount I was to pay back in that year Do I STILL have to pay it back or is it considered paid back because they taxed me on it?? Thanks

  156. 169. John Smith

    Here’s a unique situation: RBC advised me that I qualified and filled out all of the required paperwork for me and it was approved. We withdrew the RRSP’s, bought the house moved in and now I found out that we don’t actually qualify b/c I owned a mobile home before. After reading this on CRA’s website I agree that I don’t qualify but it was based on RBC’s advice and it’s been approved. I’ve contacted RBC and their response is “they’re not willing to do anything about it”!!! Can you believe that!! So, now what would you do?

  157. 170. Brian (Planner in Ontario

    Mandy:

    Great question. When you DO NOT pay back the RRSP HBP, make sure your tax preparer properly files out “Schedule 7″. If done properly, and you’re taxed on NOT paying it back, then you will be 1 year closer to having your RRSP HBP paid back!

    Speak with a qualified professional about your unique situation.

  158. 171. Brian (Planner in Ontario

    JC 123 and Shawn,

    Sorry I missed your questions before RRSP deadline. I usually try to be helpful, but as you can imagine RRSP time was busy and I wasn’t checking back.

    I hope your situations have been addressed and any questions were answered. If you require anything further, and if I can help, I’d be happy to. Just send me an email @ brian.eckhardt@investorsgroup.com

  159. 172. Brian (Planner in Ontario

    John Smith,

    You’ll need to speak with your advisor and/or insutitions manager. Call the head office and look for an option to log a complaint if they are unable to address your issues to your satisfaction – making your voice heard is always an option.

    I suppose the important thing for anyone to understand with strategies like this is that complex tax and legal matters always come into play. Unfortunately, you may run into a planner who provides inadaquate advice. Whenever tax matters and legal issues come into play, it’s always advisable to seek the advice from your accountant and lawyer. At the very least, ensure your financial advisor can present what is being done in writing. That way you can verify how you were advised should any issues result in the future.

    Happy RSP HBP purchases for years to come! Remember, always seek professional advice before implementing financial strategies to ensure the strategies is appropriate and applicable to your situation.

  160. 173. John Smith

    Hi Brian,

    Thanks for your quick response!! I’ve been in contact with RBC Client Services and they’re the ones who spoke with the bank manager who informed them that they are choosing to not do anything about the situation. As this has already been approved, should I still go ahead with my income tax like nothing is wrong or is there anyone else I should contact about this situation, outside of RBC?

    Thanks again,
    John

  161. 174. Brian (Planner in Ontario

    John,

    You really need to speak with a tax and legal professional. This needs to be escalated beyond the advice of a financial advisor. ANy financial advisor who provides accounting advice on tax matters is stepping beyond their role and scope of their position.

    I think the main lesson is that banks are designed to perform two primary functions. Taking deposits (ie. bank accounts) and lending money (ie. mortgage/car loans/line of credit etc.).

    Where are you from John? Your situation may warrant a personal financial planner, beyond an individual in a bank who may be in that role for a year to 3 years then moving on. It’s a training role for future positions and often times leads to situations that arise like you’ve experienced. Check my email address a few posts prior and get in touch if you have any direct questions.

  162. 175. dave b

    I don’t see how the advisor at RBC can be responsible.
    They probably didn’t ask the right questions, but If you never told them about you previously owning a trailer they would just assume you are a first time home buyer and just to “fill out the form”.

    Overall I would say it’s our responsibility to be kept informed

  163. 176. John Smith

    Thanks again for the responses! The advisor at RBC was fully aware of our situation and that we owned a trailer however they said a trailer doesn’t count as a first time home b/c there is no mortgage on it – only a loan. I live in Manitoba, do you think I should contact CRA directly about this?

  164. 177. cluless24yo

    Well Well Well John Smith, aren’t we in the same situation !

    RBC also gave me a very wrong financial advice. My husband and I had RRSP in various financial institutions and we were advise to withdraw them instead of transfering them – you know, to save the 50 $ cost AND work I guess for our account manager. She was fully aware we were planning on doing one withdrawal in October 2009 then the rest of the money would be in a RRSP for 90 days, as it should be. She even acknowledge herself she gave us the wrong info.

    Turns out we withdrew one of our RRSP in October 2009 and we wanted to withdraw the biggest RRSP last week…. well we couldn’t, because we officially already participated in 2009 to the HBP. So we no longer are eligible for our 10 k at RBC.

    I get it, I should have done my homeworks. I think it’s bad tho that they let us do that, aren’t they supposed to know better, isn’t their job ? Anyway…

    At first they told me the same as you, they couldnt do anything. Actually their solution was to cancel my taxes (which are already done and sent out including my 10 k contribution for the year), they wanted to cancel the transaction, put back the 10 k in my deposit account so I could take it as my cashdown, and basically send back my 6k taxes refund I should get in the mail very soon. Yeah right, they are clowns !

    I talked to the branch manager today and told her I was ready to cancel the house purchase and that I’d see her in court, since most llikely we will get sued ourselves by many, many people for cancelling on them at 5 days notice of the transaction. Of course I was bluffing but she started to look very worried. I contacted her boss (regional sales manager) and made an official complaint.

    The last recourse I have in my case is to explain and plead and beg the federal government I didn’t know and see what they can do to help me on this so I don’t have the stupid 5k penalty if I go ahead anyway and withdraw the 10 k.

    We will see how everything plays out, good luck to you too !

  165. 178. OBK

    I’ve read through the thread — glad to have so many questions already answered through the discussion!

    My situation: I made a withdrawal of $20 000 under HBP in 2009. I understand repayment is not required to begin until 2011 (i.e. 2 years after year of HBP withdrawal). I usually max out my RRSP contribution limit every year. This year I have an over-contribution amount of ~$1350.00. My inclination is to start HBP repayment now, putting that $1350.00 towards the $20 000 HBP balance and reducing annual required repayment amount for the next 15 years. But I wondered if there is any advantage to just waiting until I’m required to start repaying. E.g. say next year, with RRSP contribution limit of $18 000+, repayment of $1333.33 ($20 000/15 years) required, maybe I won’t end up maxing out once repayment taken off, or maybe I just want to take out a smaller RRSP loan to max out…could $1350 over-contribution from 2009 be carried over (instead of applied early to HBP repayment) to make up the difference for 2010 return so I can make required repayment amount AND max out RRSP as usual? I’m in a high-ish tax bracket, and maxing out my RRSP contribution limit is important to me.

    Sorry if that’s confusing…it makes sense in my head but I read it on the screen and it’s a bit…garbly. Maybe I’m just thinking about this too much?

  166. 179. Matt

    Im 21 and want to buy a home soon but I heard that if you contribute to an rrsp you cannot withdraw the funds for hbp for at least two years. Is this true?

  167. 180. Brian (Planner in Ontario)

    It’s an 89 day rule that applies. so basically – leave it in for 90 days and make the withdrawal using appropriate forms through your institution…

    The 2 years you’re maybe confusing is that you must start repaying back 1/15th of the RRSP HBP withdrawal each year beginning in the 2nd year after the year of withdrawal…ie. if you take $15,000 out in 2010, you have to repay $1,000 each year starting in 2012…

    Hope that helps.

  168. 181. Syed

    Hi,
    So I’m a recent graduate looking to purchase a condo for the first time and hope to have everythign closed by mid june. Currently I have no funds in my RRSP eventhough I have room for about 10K. By the end of the 2010 year I will definitely have contribution room for the 25K needed to max out HBP withdrawal. Given that even if I contributed the 10K that I can at this point in order to withdraw it, I don’t think I’ll be eligible for HBP cause the money wouldn’t have stayed in the account for 90 days (please correct me if this is wrong or if there is a solution for this problem, I plan on closing mid-june).
    My main question is the following:
    Would it make sense and is it even possible for me to purchase the house under my father’s name (he is a foreign national) and hold it as such over the next year. And once my RRSP is at 25 k for 90 days (in about a years time) I buy the house from him and use the HBP for that purchase. Are there any compulsory transaction charges which would nullify the benefit of the HBP if I do it as described? Since the transaction will be between me and my father there is alot of flexibility in the transaction price and terms if that would be helpful?
    Thanks in advance for your help. I’m quite confused as I really need to buy a house by Mid june and don’t know how to maximize tax breaks etc.
    Are there any other considerations for foreign buyers (i am a canadian but my father isn’t)?

  169. 182. Brian

    Syed,

    I wouldn’t be doing any justice providing advice to you without knowing your situation. The HBP is designed to access money you have been already investing into your RRSP’s and might not otherwise have monies for a down payment. Also, from the ‘tax break’ perspective, you have to determine whether it’s most advantageous for you to be taking the tax deduction now (you mention being a recent college grad – are you in a high tax bracket? Do you expect to be down the road if not today?… the reason for this question is that if you will receive minimal tax benefit from the RRSP contribution, just to pull it out under HBP, it might be best to save the contribution for future years and just use the 10K to buy the house without putting money in the RRSP first).

    You really need to discuss your situation with an advisor.

    Where are you located?

    If you would like more info send me an email – perhaps I could be of assistance (eckhardt_b@hotmail.com).

  170. 183. Adam

    I have funds in two RRSP accounts at two different institutions. Can I withdraw a sum totalling more than $25k so that I have the cash on hand for a bigger down payment (reducing the CMHC premium I will be paying), but put the ‘overage’ back before I file my tax return? Of course, if I use the extra money to buy a house, I won’t have it right away to put back. But, it’s early in the year, and I have plenty of time to save up some more money from my day job.
    So, for example, if I thought I could produce another $10k before filing my 2010 tax return, what’s stopping me from withdrawing $20k from one RRSP and $15k from another RRSP, if I recontribute the extra $10k this year?
    If I had extra cash outside of an RRSP, doing this wouldn’t make sense. On the other hand, I could not find any info on the CRA website about withdrawing more than the $25k limit (which, I think, could be an easy, honest mistake if you are withdrawing from several RRSP accounts).

  171. 184. Brian

    Adam,

    Unfortunately, it stands to be that ignorance is no excuse – especially due to instances where people will say, like yourself, ‘couldn’t it just be considered an “honest” mistake’?

    Anyhow, you can withdraw a maximum of $25K from your registered assets. It doesn’t matter how many RRSPs you have opened, you have a 25K limit on registered Home Buyers Plan withdrawals.

  172. 185. Ryan

    I have more than the $25k in an RSP savings abount earning about 1.2% currently. I already have more than the the minimum required down payment for a conventional mortgage (to avoid the CMHC insurance fees). I do qualify as a first time home buyer. Morgage will be split 50-50 between 3.85% fixed and 1.5% variable. Would I still be better off to also use the 25k allowed under the RSP HBP to increase the size of my down payment?

  173. 186. Brian

    why ar eyour long term RRSP assets earning a mere 1.2%? With everything else being equal, you’re better off to pay down debts sooner if the interest rate is greater than what could be earned elsewhere. If you expect to only continue earning 1.2%, use the RRSP for HBP…

  174. 187. Ryan

    Thanks Brian, That’s what i thought. Also, that’s a good question…why only 1.2%. Not sure. Maybe I’m a little risk averse. I’ve also been advised that I should be able to find somewhere to earn a greater interest rate long term than I’m paying on the mortgage and that I should move the money there rather than using the HBP and to keep the RSP assets in tact to compound and grow for a longer period (and without having to worry about repayment).

  175. 188. Brian

    Ryan,

    As a risk adverse conservative investor, I would suggest a long term return that is achievable in the ballpark of 4.5 – 5% (LONG TERM)… Using modern portfolio theory and historical performance, an asset allocation for a conservative long term investor of 30% equity in a portfolio would out perform one with a 100% fixed income/guaranteed asset mix – all while reducing your risk…

  176. 189. Judith

    I have a question. I purchased a house using the HBP last year. The house is in my name but my husband lives in it. Would I be penalized for not living at the residence under two years? If so could you point me to the particular tax law?

    what is the maximum period I can repay the loan to RRSP if I do not live in the house without being penalized?

    Regards,

    Judith

  177. 190. Traciatim

    Judith, I’m not so sure you are eligible for the HBP at all based on that information as one of the main conditions is that “You intend to occupy the qualifying home as your principal place of residence.” If you are not then the HBP withdrawal would have to be either placed back in your RRSP or the entire thing would count as income in the year of withdrawal and act just like a regular RRSP withdrawal.

    I was burned by a similar misunderstanding when purchasing my own house. Both my spouse and I live in the home, but the home was purchased under my name alone and so I was the only one eligible for the HBP. However, not knowing this we filled out the forms for both persons RRSPs and made a HBP withdrawal from both. It’s kind of nice that the withdrawal that had to go back was small, but it would have been nice for the financial institution to make the form easy with a check list of things that are required like a check box with “Is your name going to be on the title of the residence?” or something along that line.

  178. 191. Judith

    Thanks for that info on 189. My RRSPs only were used in the purchase and my husband’s name is not on the RRSP forms. However, it would not be my principle residency under two years. I was wondering if I would have to repay the RRSP if I don’t live in the house under two years.

    Regards,

    Judith

  179. 192. Traciatim

    I don’t understand the under two years portion. Are you saying for the first two years you will not live there, or you lived there for two years and then the situation changed?

    If you purchased the home to be your primary residence and your situation changes I’m fairly certain that eligability for the HBP is only determined at the time you buy the home. After that the regular repayment schedule applies no matter what you do with the house.

    Howvere, if you purchased it but will not occupy it as your primary residence, you may not have been eligible for the HBP in the first place. This is where you may run in to troubles in either having to reverse the transaction or pay the taxes as if the withdrawal were a regular RRSP withdrawal and lose the contribution room for the future.

    You may want to give the CRA a call and ask, since I’m just going by what I’ve read online while using my own HBP. The people there have been very helpful when I’ve called in the past.

  180. 193. Judith

    Hi Traciantim,
    Response to 192
    That’s correct. I will not be living there for the first two years.
    The reason why I asked the question was that I understand you must make the home your principle residence within eighteen months? I work in another province right now but will be moving to Windsor in little over two years.

    Regards,

    Judith

  181. 194. majoy

    Hi,
    I’m planning to purchase a house under the HBP. I already contributed 5k on my RRSP. Am I eligible to withdraw 25k under the HBP?

  182. 195. FrugalTrader

    @majoy, you can withdraw “up to” $25k which means that you’ll need at least $25k in the account prior to withdrawal.

  183. 196. Lanette

    I work with a young girl (just turned 24) who is contributing to her RRSP and to her TFSA to help build a downpayment for the next 18 – 24 months. Her contributions to her RRSP are small (approx. 2600 a year). Because she may not be eligible for the first time home buyer’s plan (she’s been living with her boyfriend who currently owns his own house and would be purchasing the next one with her), I’ve suggested she put all her money to the TFSA and other accounts outside her RRSP since she may not be able to access the RRSP funds. Is this the right advice?

  184. 197. Brian E.

    First-time home buyer
    To participate in the HBP, the RRSP annuitant must be considered a “first-time home buyer” at the time of withdrawal. Simply stated, if the person has not owned a home that he or she occupied as the principal residence in the last four years, the person is deemed to be a “first-time home buyer.

    If an individual does not own a home, but the individual has lived with his or her spouse (includes a common-law partner) in a home owned by the spouse during the period noted above, the individual is not considered to be a first-time home buyer.

    —–

    I would caution her to speak with her financial advisor to ensure her being eligible or not. However, I think you’re on the right track in that the TFSA is definately where her focus should go. The RRSP HBP was really designed for someone buying a home who might not have other savings but had accumulated RRSPs. If starting from scratch with the savings for the house, and you will be under the available contirbution space, AND the RRSP refund is not a relevant component in adding to the downpayment, the TFSA is a great place to save up for a home purchase!

    If TFSA becomes max’ed out, look for tax advantaged mutual funds (ie. corporate class) for additional savings!

    Best of luck to your colleague.

  185. 198. John

    @Lanette
    Brian E. is correct that since her partner owns his own home, she would not be eligible for the HBP as a couple since both have to be eligible.
    However, I would strongly suggest that she focuses on her RRSP over her TFSA. RRSP contributions reduce your taxable income and result in tax refunds. TFSA contributions do not reduce your taxable income; they only make any growth within the account tax free and the withdrawal / contribution rules are complicated. Being that the RRSP contributions are small to begin with, I’m doubting that she needs to have some protection from capital gains. Secondly, given she is young, I would put the emphasis on saving for retirement early because of the growth potential and capitalizing on the tax savings.

  186. 199. Brian E.

    198. John
    @Lanette
    Brian E. is correct that since her partner owns his own home, she would not be eligible for the HBP as a couple since both have to be eligible.
    However, I would strongly suggest that she focuses on her RRSP over her TFSA. RRSP contributions reduce your taxable income and result in tax refunds. TFSA contributions do not reduce your taxable income; they only make any growth within the account tax free and the withdrawal / contribution rules are complicated. Being that the RRSP contributions are small to begin with, I’m doubting that she needs to have some protection from capital gains. Secondly, given she is young, I would put the emphasis on saving for retirement early because of the growth potential and capitalizing on the tax savings.
    ——-

    @ John,

    John you need to keep in mind the GOALS of the individual. They are focused on buying a home and accumulating a down payment – I WOULD NOT SUGGEST (if ineligible) TO ACCUMULATE DOWN PAYMENT MONEY IN AN RRSP. You will be paying tax on the withdrawal to fund the home purchase and that is not what is trying to be achieved… (ps. I kind of do this stuff for a living ;-) … Sure, I support doing BOTH (downpayment AND retirement. But unfortunately life doesn’t always work so beautifully!

    Secondly, reducing taxable income might not be a huge concern for an individual in a low Marginal Tax Rate. So I would question your advice on that.

    Lastly, there is nothing complex about the TFSA contribution/withdrawal rules. The problem is, non-professionals go about it without the advice of a professional and then it gets written about in the globe and mail and everyone thinks TFSAs are confusing. Simply put:
    -You put up to your contribution limit into the TFSA and enjoy tax free growth.
    -Each year you get a new $5,000 of room (which may be indexed in the future for increases in the CPI/inflation – but only in increments of $500)
    -If you make a withdrawal, you don’t pay any tax
    -Any withdrawals are added back to your contribution room, BUT NOT UNTIL THE FOLLOWING CALENDAR YEAR AFTER THE WITHDRAWAL!

  187. 200. David

    Hi Evrebody
    Does anybody know, if I buy a house with HBP and then letter decide to use is as a rental property will I be able to do so? Does this home have to be my principal residence after I buy it?
    thank you in advance

  188. 201. Sarah A

    Hi,

    I need some advice.

    My husband and I both qualify for the HBP. He has just over $30,000 in his RRSPs and I have about $10,000 in mine. I am wondering if he makes a $15,000 spousal contribution (so he gets the deduction as his income is higher than mine) than will we both be able to withdrawal $25,000 for the HBP? I thought I read that as long as the contribution stays in the account for 90 days then its okay.

    Am I at all right on this?

  189. 202. Brian E.

    Sarah,

    That is correct. You would be considered the “annuitant spouse” under a spousal RRSP and you can make HBP withdrawals as such; the normal attribution rules for spousal withdrawals will not apply. But like you mentioned, your husbands $15,000 contribution needs to satisfy the 89 day rule; that is, money’s only invested for 89 days or less are not eligible for a HBP withdrawal. Beyond 90 days, you are able to access those funds.

    Where abouts are you located?

  190. 203. Sarah

    Thank Brian.

    I’m in Nova Scotia.

    So are you sure the normal attribution rules for spousal withdrawals do not apply? I’ve been reading a lot on this lately and I read that if a spouse (we’ll say husband in this example) makes a spousal contribution and the wife makes a withdrawal within 2 years (or so) then then husband will have to include that amount as income on his tax return. Is this correct?

    Does this not apply to the HBP? If it doesn’t could you tell me where I could find this on CRA’s website?

    Thanks so much!

  191. 204. Brian E.

    Your welcome Sarah — I can’t track a link that has these specifics on service canada or CRA website but you can call direct @ 1-800-959-8281 and speak to an agent. I did this to verify for you. The only applicable issue is the 89 day rule to be a HBP eligible withdrawal (of course, you must also meet first time home buyer criteria too)…

    Also, I pulled information from my firms “tax and estate library” which is produced by CA’s and tax professionals. There is a specific section that deals with “Spousal RRSPs and the HBP” and outlines this strategy being legitimate.

    Of course, always speak with your tax advisor regarding your specific situation.

    –Brian

  192. 205. Simon

    My common law spouse and I purchased a condo in 1996 which we still reside in. Both of our names are on the Mortgage. Does that mean that we are *BOTH* not considered first time home buyers according to the HBP requirements? Any info would be helpful.

  193. 206. Traciatim

    Simon, you are correct. Both of you own a home and are therefor not first time home buyers.

  194. 207. Jeff

    Here is a quick question.

    I used the HBP and took out 20k for the down payment. Rather than contributing the minimum (over 15 years) of approximatey 1400. I am looking to contribute 4000 this year (all toward the HBP).

    If I do that am I still required to meet the minimum payment next year (~1400) or can I skip that year because I already over contributed back to the HBP the year before?

    Any help would be appreciated
    Cheers

  195. 208. Traciatim

    Jeff, the answer is in the guide to the HBP found on CRA’s website. You are still required to make the minimum of the new balance over the remaining years. In your example you took out 20000 so your original schedule is 20000 / 15 = 1333.34 per year. If you make a 4000 repayment in year one, then year two you still need to make (20000 – 4000) / 14 = 1142.86. The next year you just take the balance divided by the remaining years and that is your new minimum repayment each year.

  196. 209. Johnathan

    I have a question.

    My wife and i last year took out an RRSP loan of $10,000 and put that directly into a new RRSP account to sit for 3 months so we could use it for the HBP on our first house. After the 3 months were up we took out the 10k and used it for the down payment on the house. I have been making the min required payment into the RRSP account ever since to repay that 10k over the next 15 years.

    Now that its tax season again. Will i be able to claim that 10k and recieve a nice tax refund on it even though the 10k is no longer in the RRSP account since we used it for the HBP?

    Cause it would be really nice to get a big tax refund on the 10k but im just not 100% sure on how it works and if i will even see any money back from it this tax season. Any help would be much appreciated, thanks!!

  197. 210. Brian E.

    When did you make the contribution? Ie. What month of 2010? If you did it in the first 60 days, is it possible your tax preparers already deducted the 10k? If not, and you made the contribution after tax season last year, then yes you can make the deduction for income tax purposes.

    You are not required to start making 1/15th payment until the 2nd calendar year after the year you made the Home Buyers Plan withdrawal either. Never hurts to do it sooner, but just wanted to point that out as well!

  198. 211. Johnathan

    We made the contribution last year in May so it would have to be done this tax season. Thankyou for clearing that up for me, i was all worried that i wasn’t going to be able to claim it because the money was already taken out after the 90 day waiting period to use for the house last year July.

    And actually i didn’t know that i could wait 2 years before paying back the RRSP’s, my banker never told me that. But whatever its fine, i got no reason to wait 2 years before i start so id rather just do it now and then its done 2 years quicker.

    Thanks for your help!

  199. 212. Brian E.

    Johnathan,

    The 90 day waiting period is the time that must be satisfied for the initial contribution to be considered a “qualifying RRSP contribution”. In plain english, because you waited until after the 89 day elimination period passed, you get the tax deduction. Had you withdrew it prior, you would not be eligible for a RRSP deduction for income tax purposes.

    I recognize that you are more than fine to make your payments right awaay back into your RRSP, but it should concern any individual when such basics of a HBP are not known by the individual they receive advice from.

  200. 213. Justin Lee

    Hello,

    Could someone please comment on my situation. My wife and I have a condo which was our first home purchase. We moved out of the condo in 2008. At that time of purchase we did not use the HBP. The condo is currently rented out to our tenant, and we haven’t used the condo as our principal residence since 2008. We now want to buy a second home which would become our principal residence.

    I talked to my accountant and he commented that I should be able to participate in the RRSP HBP now as I did not use it before.

    But I believe I have to wait till January 1, 2013 to satisfy the 5 year time period.

    Which one of us is correct?

    Also how do they verify that you have not lived in your home as a principal residence in the last five years? Is it buy the address listed on your tax return?

    Thank you for your time.

  201. 214. Dan P

    Hi,

    I have read through this but don’t see an answer to my question. Its about the repayment.

    Scenario-
    Withdrew 20K from say Royal Bank RRSP
    Purchased RRSP from say ING to repay 1/15th this year + RRSP contribution.

    Does the $1333.33 that I am repaying this year through RRSP (ING)ever get credited back to my original RRSP that I deducted from (Royal Bank in this case)?

    If so, who pays it back and when does it happen?

    Let me know if you need further clarification.

    Dan

  202. 215. Brian

    **edited ** please no solicitation of business.

    Dan P.–
    What province do you reside in? In short, you do not have to repay your HBP to the same institution you withdrew from.. However, you do need to inform the CRA of your repayments to ING by completing ‘Schedule 7′, in Part B (outside Quebec), which will be attached to your tax return. Speak with your tax preparer/accountant to ensure this is properly reported on your tax return.

  203. 216. Ed Rempel

    Hi Justin,

    I don’t get to say this often, but you are right and your accountant is wrong. To be considered a first-time home buyer, you have to not have lived in a home that was your principal for 5 years.

    Being a first-time home buyer is not like virginity – you can get it back. :) But you do have to wait 5 years.

    As for evidence of your principal residence, you only need to provide evidence if requested or audited. The HBP withdrawal form has questions that you need to answer stating that you have not lived in a home you own as principal residence for 5 years.

    If audited, you should provide evidence of where you lived, such as a lease or utility bills. If you owned a rental property, you should be able to show that it was rented out, which should be by claiming the rent income on your return.

    Ed

  204. 217. Sarah

    Hi.

    My husband and I are living in his grandmothers old house rent free.

    We are looking for land and plan to build soon. We both have money in rrsps that we want to use for HBP. Do we qualify as new home buyers? We’ve lived in the current residence for 4 years or so saving money for a down payment.

  205. 218. FrugalTrader

    @Sarah, if you are not on title, and haven’t owned property over the last 5 years (as Ed mentioned), then you should qualify for HBP.

  206. 219. Dan P

    Hi Brian –

    I am in Ontario. My accountant did complete the schedule 7 in this years tax return.

    I assume that the governenment will put the funds back to my original Royal Bank RSP that they were deducted from correct?

    Do you know how long it takes before they put the money back?

    Thanks for your help.

    Dan

  207. 220. Sarah

    I am not on any title nor have I owned property so I think I will be fine.

    However my husband’s name is on a house that is to be given to him when his grandparents pass away. His name is on it but he has never lived there.

    Will he still qualify as a 1st time home buyer?

  208. 221. Ed Rempel

    Hi Dan,

    You HBP can be repaid to ANY RRSP and it is you that repays it, not the government. You said you have already repaid the $1,333.33 to your ING RRSP, so nothing needs to go back to RBC.

    On your tax return, your accountant determines whether to claim a tax deduction for this or apply it to your HBP balance owing. It sounds like your accountant used it to repay your HBP for the annual amount. That is all that needs to be done.

    Each year, you should use $1,333.33 or more of your RRSP contributions to ANY RRSP to apply them to the HBP amount outstanding.

    Ed

  209. 222. Ed Rempel

    Hi Sarah,

    I take it the house to be given to him is not the one you are living in now?

    The determining factor is not whether or not there was a house in his name. The determining factor is whether or not he lived in a home that he owned and was his principal residence.

    Ed

  210. 223. Justin Lee

    Hi Ed,

    Thanks for your response.

    I have on more question for the forum. I believe I qualify for the HBP in 2013 since i moved out of my condo in 2008. Therefore I am looking to use RRSP’s to participate. I make significantly more than my wife in terms of income. Therefore I was looking into if I could put in 25K into my RRSP to get a higher tax return as well as use a Spousal RRSP so that the 25K that is applied to my wife can lower my taxable income as well. My question is does the Spousal RRSP qualify for the HBP? I remember reading somewhere that it had to be in an Spousal RRSP for a certain amount of years rather than the 90 days that is required of a normal RRSP when utilizing the HBP.

    I scanned through both the HBP thread as well as the Spousal RRSP thread and didn’t find anything to verify the situation.

    Thank you all for your time.

  211. 224. Ed Rempel

    Hi Justin,

    Yes, the spousal RRSP can be used for the HBP, but that would be your wife’s HBP withdrawal, not yours. The spousal RRSP is actually in her name, so she would be making that withdrawal and she would have to repay it.

    Ed

  212. 225. Justin Lee

    Hi Ed,

    Thanks for the reply. I understand that it will be my wifes withdrawl to the HBP, but I am assuming that I get the Tax benefit of putting it into the spousal RRSP at my mariginal tax rate not her’s correct?

    Also when I reviewed the spousal RRSP posting I found the following statement:

    “The main caveat being that the lower income spouse cannot withdraw from the plan until 2 calendar years (Jan 1-Dec 31) after the last contribution. Otherwise, the withdrawal will be taxed in the hands of the contributor.”

    My concern is if I deposit money into the Spousal in early 2013 to meet the RRSP deadline I can’t use these funds until 2015? Does this rule supersede the 89 day rule of the HBP or would HBP’s 89 day rule overrule the 2 year requirement and allow me to take out the funds in 2013 once 89 days has past?

    Thank you so much for your help Ed.

  213. 226. Ed Rempel

    Hi Justin,

    Good question. In your case the 89-day rule supersedes the 3-year rule.

    The 89-day rule applies to withdrawals under the Home Buyers Plan, while the 3-year rule (2 full calendar years) applies to other RRSP withdrawals.

    And yes, you get the deduction for spousal RRSP contributions to your wife’s spousal RRSP.

    Ed

  214. 227. Scott

    I have never owned a house, I have been renting an apartment for almost ten years. I do however own a cottage that I spend the summers at. Will the cottage disqualify me from the HBP, or is the apartment my principal residence?

  215. 228. Brian

    Scott,

    To be eligible for the HBP, you must:
    1. be resident of Canada
    2. be a “first-time home buyer”
    3. have entered into a written agreement to buy or build a “qualifying” home…

    A “first-time home buyer”, simply stated, is a person that has not owned a home that he or she occupied as the principal residence in the last four years.

    Being a renter, on the surface it would appear as if you would be eligible to participate.

    The only thing I would caution (and you should seek the opinion of an accountant on this matter) is that using the HBP may impact your ability to use the cottage in its entirety for principal residence exemption in the future, to reduce capital gains on a disposition.

    This may or may not be of concern to you and to ultimately determine the true cost of the decision you would need to make present and future valuation calculations. Regardless, the advice of an accountant would be my next phone call if I were in your position.

  216. 229. Dan P

    So in terms of repayment, the repayment will never go back to the original account that you withdrew from?

    When you purchase additional RRSP to pay back the yearly repayment, you are essentially starting a new account and by the end of your repayment you will have accumulated the total of your original withdrawl?

    Am I getting this correctly? Let me know.

    My other question is if I chose not to repay via RRSP and just pay the amount through my tax return(cheque), where does that repayment show? Will that be credited back to my original RRSP account from where the funds originally came from?

    Dan

  217. 230. Brian

    Dan,

    You can put the HBP repayment into ANY rrsp account you have established. You can choose that to be the original account you withdrew from, or a new one… it’s your decision. Although, I don’t know if there’s any advantage to having multiple accounts. Find an advisor you trust and who has your interests first, and consider consolidating your RRSP accounts into one.

    Again, you just have to repay it into an RRSP plan in the name of the HBP participant (regardless of what institution that may be).

    If you choose not to pay the amount required, that amount will be added into your tax return as ordinary income earned. Let’s suppose you withdrew $15,000 and have to pay back $1000. Supposing you earned $50,000 taxable income from employment then not paying $1,000 into your RRSP and designating that as a repayment would show your bottom line as earning $51,000.

    Assuming again that this was the first repayment you were scheduled to make, of the 15 payments (1/15th per year over 15 years), then your assessment should show that you owe $14,000. It is all tracked.

    Just be sure that if you make the repayment, you should indicate this through the appropriate form (Schedule 7) when completing tax return.

    Speak with a tax preparer/accountant for more details on filing your return.

    Brian.

  218. 231. Ed Rempel

    Hi Scott,

    Brian is right that you will have to choose between claiming your cottage as your principal residence and using the Home Buyers Plan when you buy a home.

    Since you live in your cottage for much of the summer, it is reasonable to assume that you “normally inhabit” your cottage. So claiming it as your principal residence is probably reasonable.

    Which of the 2 is better for you depends on a few factors, such as how much the cottage has grown in value and whether you need the HBP to get a large enough down payment (and reduce CMHC fees).

    Getting professional advice on this is a good idea.

    Ed

  219. 232. Ed Rempel

    Hi Dan,

    You have asked a couple of times about how exactly the the HBP is repaid. Your ideas don’t really make sense because you need to understand how the repayment happens.

    Your RRSP administrator does not track your HBP. It is only tracked by CRA. When you first withdraw, you use a CRA form to get approval and designate the withdrawal as a HBP withdrawal.

    After that, CRA will track how much you own and you will get a statement showing your balance and the minimum you have to pay back each year.

    Your repayment is made on your tax return. You make an RRSP contribution anywhere. When you file your tax return, you designate how much of your RRSP contributions for the year you are claiming a deduction for (to get a refund) and how much of your contributions you want to apply to the HBP. You will not get a tax deduction for the amount you designate to the HBP, so you normally apply the minimum amount (although there are various strategies depending on your tax brackets in different years).

    Does that clarify it, Dan? All the tracking is done by CRA – none by your RRSP administrators.

    So you understand the strategy, with the HBP, you are borrowing from yourself. There is no interest, but the cost can be high, since you lose the amount that your investments would have made if they had stayed invested. If you invest properly in equity funds, you could easily lose 10%/year or more. However, there are benefits in helping you have the down payment to buy your home and save CMHC fees.

    Ed

  220. 233. Dan P

    Hi Ed,

    Yes I understand. Thank you for your explanation.

    Dan

  221. 234. dale

    One thing I’m confused on, i was talking to the bank about this the other day and he made it sound like i can borrow $25,000 from my RRSP. but i only have $2000 in my RRSP right now. That cant be right…right? the way i thought it worked is i can borrow up to $25,000 only if i had $25,000 in my RRSP

    if anyone could clear this up for me id appreciate it

  222. 235. FrugalTrader

    @dale, the banker likely meant that (if you have the contribution room) you can get a loan to fund your RRSP, then withdraw from it later to fund your down payment. But yes you are right, you need $25k in your RRSP in order to withdraw $25k from it

  223. 236. Uniqua

    Hi,

    I have a question regarding one of the requirements for the HBP = “occupy the qualifying home as your principal place of residence”.

    I originally purchased my condo unit in 2007 but I only took out $25K from my RRSP in September 2010 to use it as a further downpayment. I got Occupancy in November 2010. However, I decided to rent out my unit as I decided to move to another country for business for a few months. I am now looking to move into the condo in September/October 2011.

    Based on the condition, it states that when I withdrew the funds I had to have the intention to live there (which I did but circumstances changed). I am now wondering about the statement of “occupy the qualifying home as your principal place of residence NO LATER THAN ONE YEAR AFTER BUYING OR BUILDING IT.” From what date does this one year rule apply?

    The condition further states:
    “In some cases, you may not occupy the qualifying home by the end of the 12-month period after you bought or built it. If this happens, you are still considered to have satisfied this condition if, at the time you withdrew funds under the HBP, you did in fact, intend to occupy the home as your principal place of residence no later than one year after buying or building it.”

    HOW CAN A PERSON PROVE THAT?

    Any help/advice would be much appreciated!!

  224. 237. Indian T.v Serials

    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.

  225. 238. Martha

    Is it possible to use the HBP to purchase a mobile home on a leased lot? I can see that mobile homes meet the definition of a qualifying home, but what about the leased lot? Would they have to be separate agreements, and the HBP could be used towards the purchase of the mobile home, but not the lot?

    What if the leased lot is on a lake, in cottage territory? Would that make it hard to show intent for use as principle residence (current renter)?

  226. 239. DaveR

    I am hoping to use the HBP ($25,000) to purchase my first property — can someone clarify how the “no minimum length of time as primary residence” is interpreted. I want to buy a condo as a rental property before I leave Canada for the US. I am currently renting a condo in the city in which I will purchase the investment property.

  227. 240. Peter

    FT,
    Do gains made by buying and selling stocks within my RRSP count as repayment? Or does repayment have to be dollars inserted from outside the RRSP?

    Thx, I enjoy your site…
    Peter

  228. 241. FrugalTrader

    @Peter, my understanding is that gains within an RRSP are not considered a contribution.

  229. 242. dave

    Hi everyone,
    I have the following scenario and I was wondering if I am a first time home buyer:
    Bought a house with my parents and I was on title. It was sold March 2007.
    My fiancee, who is a First time home buyer, and I are looking into purchasing a home in 2012 (right now).
    Do I qualify?

    Part B: What benefits besides the HBP, does the government give for First time home buyers?

    Thanks for all your help.

  230. 243. dave

    FYI on the last comment: my previous withdrawal has been paid off.

  231. 244. Michael

    My wife was on maternity leave in 2011. She has an HBP balance of $7000. She usually makes $100k+ when working full time. She did not make any RSP contributions in 2011 because her income was only $20k. Her annual repayment is $1,000 and it will automatically be added to her 2011 income.

    My question is this: can she elect to have the full $7,000 balance added to her 2011 income?

    The reason is that she is in a low tax bracket in 2011. To have the $7,000 added to 2011 income will not cost much compared to paying a high marginal rate on the repayments made when she’s making her usual $100k+.

    I realize now we made a mistake by not contributing $7,000 in 2011 and designating it all as a repayment to HBP. But it’s too late to do anything about that now!

  232. 245. Brian

    Michael,

    Good thought process, but I have confirmed for you that no she cannot elect to have the whole balance added to her income. Only the scheduled repayment amount can be included in income (and then only if she does not designate sufficient RRSP contributions as HBP repayments).

  233. 246. dlm

    If you no longer own the house (or mortgage), and you still owe 10+ years of HBP repayment, why can’t you take the whole repayment as *income* on income tax return especially if you income is low?
    If you are retired (nearing 71), if it worth it to pay into RRSP, either HBP or leftover contribution room? It seems possibly silly to pay in, then take out within short term.
    Also, where can I find specific RRSP/RIF information comparing bank policies re withdrawals, costs etc?

  234. 247. Ed Rempel

    Hi Dave,

    I just saw your post. Being a first time home buyer is not like virginity – you can get it back! :)

    You appear to be a perfect example. You are considered a first time home buyer again if you have had 4 complete calendar years without owning a home. Since you did not own from 2008-11, you should be able to use the program again this year.

    If you want to be sure, here is a link to the HBP withdrawal form. Note the 6 questions they ask. They will determine your eligibility: http://www.cra-arc.gc.ca/E/pbg/tf/t1036/ .

    Ed

  235. 248. Mark

    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.
    My question is if you never designate a repayment for the full 15 years is your RRSP repayed by having the amount due included in your income for each year?

  236. 249. Brian Eckhardt

    Mark,

    That would be correct.

  237. 250. Chris Thorne

    Is it possible to combine the Home Buyers Plan with the Smith Manoeuvre?

  238. 251. FrugalTrader

    @Chris, can you elaborate? In my opinion, you should have at least 20% equity in your house before considering the SM.

  239. 252. Peter

    I’m little confused with question #5 of the HBP T1036 form. I have a situation where I want to use my RRSP under the HBP for my downpayment for a presale construction, but the condo will not be completed until 2014 (which is 2 years from now). Because the completion is in 2 years, I won’t be able to become a resident of the condo one year after my HBP withdrawal. Am I eligible to use the HBP? Question #5 does use the word “intent”, would that make my situation an exception?

  240. 253. Jayboard

    What happens if you fail to pay the amt back after 15 yrs?

  241. 254. Sare

    Hi,

    I qualify for the HBP. However, I have approx $15,000 in my rrsp RBC bank and about $10,000 in my presidents choice rrsp….
    I just don’t know what steps I need to do to get the money out? I know I can withdraw it but how to I make it qualify fort HBP?

  242. 255. Brian Eckhardt

    Jayboard:

    For each calendar year you do not repay your HBP required pymt, the 1/15th is considered a regular RRSP withdrawal and you will report that AMT as income. After the 15 yrs in which you need to pay it back, whether you physically nake the deposit or not the HBP will be repaid.

    Hope that helps!

  243. 256. Brian Eckhardt

    Sare,

    You need to complete the required HBP withdrawal request form and process it with the institution’s where the RRSP is held. Speak with a rep from the two banks you have an RRSP with to ensure conditions of participation are met and they can guide you the rest of the way!

    Happy home buying…

  244. 257. Ed Rempel

    Hi Peter,

    The HBP withdrawal needs to be made in the year you take ownership of the condo. When you buy a new construction condo, you make take possession when construction is complete, but then pay rent until you actually take possession perhaps a year later.

    The key date is when you take ownership, not possession. You may be able to qualify for the HBP, but you have to make all the deposits and then take possession and pay rent all from your own resources.

    Your RRSP and the HBP can only help you when you actually take ownership.

    Ed

  245. 258. Ed Rempel

    Hi Chris,

    The Home Buyer’s Plan and the Smith Manoeuvre are completely separate plans, but they can sometimes be used in combination.

    For example, if you qualify for the HBP but already have the 20% down payment, you could also:

    1. Withdraw $25,000 from your RRSP under the HBP.
    2. Pay this $25,000 onto your mortgage.
    3. Reborrow the $25,000 to reinvest with the Smith Manoeuvre.

    The results of this are:

    1. You can still have the $25,000 invested similarly.
    2. The $25,000 no longer compounds tax-free (but you can defer the capital gain many years with a tax-efficient investment).
    3. You have reduced your mortgage by $25,000 and reborrowed with tax deductible interest (at a higher interest rate though) that will remain tax deductible for many years.

    This may or may not be a smart strategy, depending on your tax bracket in the next few years and how little taxable income your investments will produce.

    I’m sure there are other possibilities for combining the Home Buyer’s Plan and Smith Manoeuvre strategies.

    Ed

  246. 259. Gogernator

    Hi I have a quick question about the HBP. If I have all my RRSP is invested in stocks, can I put in my maximum amount of RRSP contribution this year (say 25K) then withdraw the cash for a deposit on a house, there is about 100K in the RRSP invested right now. I know that the money has to be liquid and in for 90 days, but does the cash component itself have to be in for 90 days? We are looking at putting an offer on a house this week, but i would prefer to put in a full RRSP contribution for this year, getting the tax return, and then withdraw the money for the deposit, without having to liquidate shares in the RRSP portofolio.

    Thanks in advance,

    ..C

  247. ..C,

    …As long as if you qualify as a first time home buyer:

    The requirement is for the funds to be INSIDE the RRSP. It doesn’t matter if it’s invested in stocks, bonds, mutual funds, cash etc. As long as the funds have been in for 90 days. No need to sell shares if you’re holding cash.

    Brian Eckhardt

  248. 261. Gogernator

    Hi Brian,

    Thanks for your answer!! One other quick question, I have recently moved back to Canada from Europe (away for 10+ yrs). If I still own a property over there, would I be considered a first time buyer in Canada as I have never had a property here?

    Once again thanks to everyone who responds on these boards, it’s very helpful.

    Cheers,

    ..C

  249. …C,

    My tax and legal sources have confirmed for me that no, you would not be considered a “first-time home buyer” if you had an “owner-occupied home” during the prohibited period (4 years prior to purchasing your home); even if that home was not located in Canada.

    Hope that helps,
    Brian

  250. 263. Income Tax Man

    First time home buyers receive some interesting benefits in Canada. When I bought my first home I was allowed to write off $5000 from my income tax for that year and I got the most money back on my tax return ever. I hope when I do my taxes in 2012 it works out well but i know i wont make a lot of money back this year.

  251. 264. Phala

    This is the plan i just used to buya home at 400k with only 5% down.

    I live tenants that pay my mortgage off and i need your help for many questions.
    Should i use the extra money to pay my mortgage or build another down payment for another property since i want to invest in real estate?
    I also heard about using RRSP for real estate investing without withdrawing it, is it true?

    What should i do about taxes, i just moved in november 2012 and my tenants paid me cash.

    Thanks a lot

  252. 265. Ed Rempel

    Hi Gogernator,

    I assume you were living in the property you owned in Europe? If you never lived in the property you own, then you could still be a first time home owner, for example if it was a rental property.

    Ed

  253. 266. Rebecca

    Can anyone tell me when the rule changed for eligibility of being a first time home buyer changed from three years to five years?

  254. 267. art

    Hi Everyone, I’m happy this forum is still alive. I have a cloudy scenario and wanted you opinions.

    I have bought a house with the family Dec 2009 ( owned by 3 members of my family) and non have made ever made any contributions to RRSP or utilized it.

    I planning to move out this year, and I was wondering if it’s too late to contribute and take advantage of the HBP, solely for myself.

    Any feed back will be much appreciated. Thanks!

  255. 268. armaan

    Hello,

    I withdraw 10K from my RRSP And 5K from my spouse RRSP under HBP plan.

    Now its time to repayment. I have my own RRSP Account and i will deposit my due for this year.

    For my spouse, can i open spousal RRSP and deposit money in my spouse account so that it can be consider has her repayment for the loan.

    I am asking this question here, because i went to TD and they informed to me that my spouse need to repayment loan by herself.

  256. 269. Dan

    @art I believe you need to be considered a first time buyer 5 years prior, so since it has been less than 5 yrs you likely cant take advantage of the HBP

    @armaan the money needs to be repaid to the account it was taken from. Since the money was taken from your spouses RRSP it needs to be paid back there, but you could always give him/her the cash and get them to do the repayment

  257. 270. Henry

    Hello,

    I have a question regarding the use of RRSP for the first time HBP.
    I have 13k in my RRSP account under my name and I am qualified as the first time home buyer. I understand I can withdraw up to 25k but unfortunately I haven’t saved enough. So I still have 12k to use for the first time HBP, my question is can I withdraw this 12k later year by year as the first time HBP?

    For example: I buy the house in Dec 01 2013 and withdraw 13k from my RRSP as first time HBP.

    And then I contribute 5k to my RRSP in the 2013 tax year and can I withdraw this 5k amount 3 months later as the first time HBP?

    And in the 2014 tax year, I will contribute another 7k to my RRSP and can I withdraw this 7k amount 3 months later as the first time HBP?

    All your answers are much appreciated.
    Many thanks,
    Henry

  258. 271. Lanette

    The HBP is a one-time withdrawal up to a $25K maximum, meant to assist with a downpayment, so you would not be able to draw on the remaining room after your initial purchase.

  259. 272. Diane

    My understanding is that at age 71, a HBP participant has three choices – one of which is to have the annual repayment amount considered to be income on his or her tax return and obviously, pay the required tax on that. One question that comes to mind is: Would that “income” amount have an impact on GIS? (i.e, would or could it be considered part of the $3500 exemption amount).

  260. 273. Dave

    I took out 5000$ to put down on a house which looks like it will fall through due to house inspection. Because I transferred this out of my RRSP already does that mean I can’t do it again? Or because I did not use it to purchase a home can I retry at a later date? Thanks!

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