First Time Home Buyers and RRSPs

Kam was extremely helpful in the process of applying for my mortgage. He responded to my questions quickly and went the extra mile to help make the process as smooth as possible. -Lori K. & Mario L.

Achieving homeownership is a very rewarding experience for many Canadians. Not only is a home a roof over your head, but it is where memories are made. It can also be a very sound investment and a hedge against inflation over the long run.

Of course, if you live in the Vancouver or Victoria BC area, you will agree that real estate prices are high. To make matters even tougher, a 5% down payment on a $500,000 house is $25,000. That’s a sizeable chunk of cash, so it’s not surprising that down payments are one of the biggest obstacles standing in the way of first time homeownership.

These down payments can take many forms, such as savings over time, an early inheritance or a monetary gift from family. But did you know that you might also be able to take it out of your RRSPs?

First Time Home Buyers and RRSPs

This option is called the Home Buyer’s Plan (HBP). The HBP is an excellent option that makes coming up with a down payment much easier to achieve, but few use it because it’s difficult to understand.

In a nutshell, the Home Buyer Plan is a Canada Revenue Agency program that allows you to withdraw up to $25,000 from your Registered Retirement Savings Plan (RRSP) to use as a down payment to buy or build a qualifying home for yourself or for a related person with a disability, or to help a related person with a disability buy or build a qualifying home. If you buy the qualifying home with your spouse or common-law partner, or with other individuals, each of you can withdraw up to $25,000.

Before you can participate in the program, you must meet a number of conditions.

Before applying to withdraw funds from your RRSP you must:

  • Have entered into a written agreement to either buy or build a qualifying home for yourself or for a related person with a disability, or to help a related person with a disability buy or build a qualifying home.
  • Intend to live in the qualifying home as your principal place of residence no later than a year after purchasing or building it. The same holds true if the home is for a related person with a disability.
  • Be considered a first-time buyer. The good news is that even if you or your spouse/common-law partner have previously owned a home, you may still be considered a first-time buyer.
  • And, in all cases, your HBP balance on January 1 of the year of withdrawal has to be zero.

When a withdrawal is made:

  • Neither you nor your spouse/common-law partner or the related person with a disability you help buy or build the qualifying home for can own the qualifying home more than 30 days before the withdrawal is made.
  • You must be a Canadian resident.
  • You have to complete Form T1036 for each eligible withdrawal.
  • You have to receive all withdrawals in the same calendar year.
  • Maximum withdrawal is $25,000.

After all your withdrawals have been made:

You have to buy or build the qualifying home for yourself or the related person with a disability, or to help a related person with a disability buy or build a qualifying home before October 1 of the year after the year of the withdrawal.

Who qualifies as a first-time buyer?

You are not considered a first-time buyer if you or your spouse/common-law partner owned a home that you occupied as your principal residence during the period beginning January 1st of the 4th year before the year of the withdrawal, and ending 31 days before your withdrawal.

If you are a person with a disability, or you are buying or building a home for a related person with a disability, or helping such a person buy or build a home, you do not have to meet this condition. The condition is that the home must be better suited or more accessible to the needs of the disabled person.

What is a qualifying home?

It is an existing housing unit or one being constructed. It can be a single family, semi-detached, townhouse, mobile home, condominium or an apartment in a duplex, triplex, fourplex or apartment building. A share in a cooperative housing corporation that entitles you to possess and gives you an interest in a housing unit also qualifies. It must be located in Canada. Neither you nor your spouse or common-law partner can own the qualifying home more than 30 days before the RRSP withdrawal. This condition is extended to include a related person with a disability and their spouse or common-law partner when the purchase relates to the person with a disability.

What about the RRSPs?

Your RRSP contributions must be in an RRSP for at least 90 days before you can withdraw them.

You have to repay all RRSP withdrawals. Generally, you have to repay all RRSP withdrawals within a 15-year period. You will have to pay back an amount to your RRSP 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.

We hope this gives you a better idea of what the Home Buyer Plan is, and that maybe you do have the down payment for a home after all!

For more information on the Home Buyer Plan, or to discuss other first time home buyer mortgage needs, please feel free to contact one of our Mortgage Professionals.

If you want to know more about buying a house in Victoria BC for the first time. or would like to meet with a mortgage broker, feel free to give us a call at (250) 590-6520 or

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