For many people, saving for a down payment is an important part of purchasing a home of their own.

With the Home Buyers Plan (HBP), first time homebuyers in Canada can take out funds from their registered retirement savings plans (RRSPs) to buy or build a qualifying home that will be their principal residence.

The Plan allows first time buyers to withdraw up to $25,000 from their RRSP (or, up to a maximum of $50,000 per couple) tax free, and have 15 years over which to reimburse their RRSP. Money withdrawn can be all or part of the down payment.

Who can participate in the HBP?

If you and your partner are residents of Canada, have not owned a principal residence at any time within the past five years, you may be eligible to participate.

No RRSPs? Here's how you can make the most of the HBP

The HBP permits an individual to establish an RRSP with borrowed funds, and then to use the resulting tax refund for a down payment. In this scenario, the individual borrows funds that are contributed to an RRSP. After a 90-day period, the RRSP is collapsed to repay the loan. He or she receives a tax refund that can be applied to the purchase of a home. Note that borrowing funds for an RRSP will impact your "total debt servicing ratio," and possibly your eligibility for a mortgage.

There are a few details to keep in mind.

The purchased home must be owner-occupied, and the RRSP must be repaid with minimum annual payments of 1/15th of the withdrawn amount. If you do not repay the amount due for a year, it will be included in your taxable income for that year.

Also, you must have a written agreement to buy or build the qualifying home, not just a mortgage pre-approval.

You cannot own the qualifying home more than 30 days before the withdrawal, and you must buy or build the home before October 1 of the year after the year of withdrawal.

This is only a short overview of the HBP. More information may be found on the Canada Revenue Agency website at www.cra-arc.gc.ca; use searchword "HBP" to locate the introductory page on this program.

Derek Rowley, your Invis Mortgage Agent, can discuss the details of the Plan, and can advise on how it may form a part of a personalized mortgage strategy that best suits your individual needs.

Independent Mortgage Advice Is Yours

To meet your needs, or those of friends & family, I can...

  • Shop the market to find you the best rates and mortgage products, whether you are purchasing a home, refinancing or renewing your mortgage.
  • Guide you on credit and mortgage qualifications.
  • Simply the financing process.