Nowadays, for many Canadians, saving up for a down payment to buy a home feels like an uphill battle.
To help get their faster, the Government of Canada offers several programs. One of the most popular is the Home Buyers’ Plan (HBP). This program allows eligible buyers to withdraw up to $60,000 per individual (or $120,000 per couple) from their RRSP (tax-free). This money can then be put this toward their first home.
By allowing you to unlock savings you’ve already built, the HBP can dramatically shorten the time it takes to get into your first home. However, the program comes with rules, timelines, and repayment requirements that every buyer should understand before applying.
In this article, we’ll cover everything you need to know about the Home Buyers’ Plan (HBP), including:
- What Is the RRSP Home Buyers’ Plan (HBP)?
- Who Is Eligible for the HBP?
- How Much Can You Withdraw With the HBP?
- How Does the Home Buyers’ Plan Work?
- Repaying Your RRSP Under the HBP
- Pros and Cons of the RRSP Home Buyers’ Plan
- How Does an RRSP HBP Compare With Other Savings Programs?
- Can You Cancel the HBP?
- Additional Support for First-Time Homebuyers
What Is the RRSP Home Buyers’ Plan (HBP)?
The RRSP Home Buyers’ Plan (HBP) is a federal program designed to help first-time buyers purchase or build their first home. It allows eligible Canadians and permanent residents to withdraw money tax-free from their Registered Retirement Savings Plan (RRSP). This money can be used toward a down payment on their first home.
For example, let’s say you have $30,000 in your RRSP. Normally, if you withdraw that money, it would be treated as taxable income. This means that you would owe income tax on it when you file your return. However, under the HBP, you can withdraw the $30,000 without paying tax upfront.
To keep the funds tax free, participants in the HBP must repay the withdrawn amount to their RRSP within 15 years, starting 2 years after the initial withdrawal. If you miss a repayment, the amount of missed repayment due for that year will be added to your income and taxed at your marginal tax rate.
As such, the primary benefit of the HBP is that it gives first-time buyers a way to access their own savings for a down payment without triggering an immediate tax bill. Think of it like a loan to yourself.
Buyers’ Note
Who Is Eligible for the HBP?
To qualify for the HBP, you must meet certain criteria set out by the Canadian Revenue Authority (CRA). These include:
- First Time Buyer – You (and your spouse or common-law partner, if applicable) must not have owned a home that you occupied as your principal residence in the past four calendar years.
- Canadian resident – You must be a permanent resident of Canada at the time of the RRSP withdrawal and until the home is purchased or built.
- Intention to occupy – The home must be intended as your principal residence within one year of purchase or construction.
- Written agreement – You must have a signed agreement to buy or build a qualifying home, such as a new construction or a resale property you plan to live in. This will typically be an accepted offer to purchase. (Promise to Purchase in Quebec).
There is one exception to the first time buyer requirement. That is, you may still qualify for the Home Buyers’ Plan if you are buying or building a home for a relative with a disability who qualifies for the Disability Tax Credit (DTC) and intends to live in the home as their principal residence.
Buyers Tip
How Much Can You Withdraw With the HBP?
Under the Home Buyers’ Plan (HBP), you can withdraw up to $60,000 from your RRSP to buy or build a qualifying home. If you’re purchasing with a spouse or common-law partner who also qualifies, you can each withdraw up to $60,000, for a combined total of $120,000.
The amount you withdraw must have been in your RRSP for at least 90 days before the withdrawal date. You can make a single withdrawal or multiple withdrawals within the same calendar year, but the total cannot exceed the $60,000 limit.
It’s important to remember that the HBP is not “free money”. It is an interest-free loan to yourself that must be repaid to your RRSP over a 15-year period, beginning two years (or temporarily, five years) after the withdrawal.
How Does the Home Buyers’ Plan Work?
To use the Home Buyers’ Plan (HBP), you must first have an RRSP (Registered Retirement Savings Plan). You can open one through any major bank, credit union, or online investment platform in Canada.
Once your RRSP is open, the money you plan to withdraw must stay in the account for at least 90 days before you can use it under the HBP. After that period, you can request a withdrawal by completing Form T1036, titled “Home Buyers’ Plan (HBP) Request to Withdraw Funds from an RRSP.”
Here’s how the process works step-by-step:
- Complete Area 1 of Form T1036 and submit it to your RRSP issuer (the bank or institution that holds your RRSP).
- Your RRSP issuer completes Area 2 and processes the withdrawal.
- You can make multiple withdrawals, but all of them must occur within the same calendar year as your first withdrawal, or by January of the following year at the latest.
- After processing, your RRSP issuer will issue a T4RSP slip showing the total amount withdrawn. You’ll need this slip when you file your next tax return.
- You must buy or build the home by October 1 of the year following your withdrawal. If you don’t meet this condition, your participation in the HBP may be cancelled, and the funds will be treated as taxable income.
Buyers Note
Repaying Your RRSP Under the HBP
One key feature of the Home Buyers’ Plan (HBP) is that all funds must be repaid within 15 years, with repayments starting two years after withdrawal. For example, if you withdraw funds in 2024, your first repayment will be due when you file your 2026 tax return.
Each year, you must repay at least 1/15th of the total amount withdrawn. So, if you took out $30,000, your minimum annual repayment would be $2,000. Repayments are reported on your tax return using Schedule 7, line 24600. If you miss a repayment, the required amount for that year is added to your taxable income and taxed at your marginal rate.
You can repay more than the minimum at any time. Any extra payments reduce your outstanding balance, which in turn lowers your future minimum annual repayment amounts. This is since the 15-year repayment window remains the same. For example, if you withdraw $30,000, repay the minimum of $2,000 for 4 years and then repay $12,000 in year 5, your annual repayments would drop to $1,200.
| Year | 1 | 2 | 3 | 4 | 5 | 6 |
| HBP balance | $30,000 | $28,000 | $26,000 | $24,000 | $22,000 | $12,000 |
| Minimum repayment | 30000 / 15 = 2000 | 28000 / 14 = 2000 | 26000 / 13 = 2000 | 24000 / 12 = 2000 | 22000 / 11 = 2000 | 12000 / 10 = 1200 |
| Repayment | $2,000 | $2,000 | $2,000 | $2,000 | $12,000 |
Note: You can choose to repay the entire balance at any time. Also HBP repayments do NOT count towards your annual RRSP contribution limits. However, you also can’t claim a tax deduction for HBP repayments.
Pros and Cons of the RRSP Home Buyers’ Plan
Before deciding whether to use the HBP, it is important to consider your personal situation. That said, here are some pros and cons of the RRSP Home Buyers’ Plan
Pros of the RRSP Home Buyers’ Plan:
- Acts as an interest-free loan – Withdraw up to $60,000 (or $120,000 for couples) from your RRSP without paying tax upfront or interest to a lender. The HBP effectively lets you borrow from yourself, giving you access to your own savings to help fund your home purchase.
- Boosts your down payment – Helps you reach the minimum down payment faster, especially in high-priced markets.
- Can combine with other programs – The RRSP HBP program can work alongside the First Home Savings Account (FHSA) and RRSP tax deductions to maximize savings.
Cons of the RRSP Home Buyers’ Plan:
- Impact on RRSP growth – Money withdrawn from your RRSP won’t benefit from potential investment gains during the repayment period. This can negatively impact long-term retirement goals.
- Strict repayment rules – The HBP provides temporary financial relief; however, you must still repay at least 1/15 each year, and the full amount within 15 years. If you do not, then the missed amount is added to your taxable income.
- Not all RRSP funds qualify – Contributions must be in your RRSP for at least 90 days before withdrawal. This means that you will likely need an existing RRSP already set up, with the deposited amount in it before you start looking to purchase.
- Future tax refund impact – While HBP withdrawals are tax-free, repayments don’t generate new tax deductions since you’re returning previously withdrawn funds. This slightly reduces your overall RRSP tax advantage during the repayment period.
- Eligibility restrictions – The program is only available to Canadian residents and permanent residents who qualify as first-time homebuyers, or who are buying or building a home for a relative with a disability.
How Does an RRSP HBP Compare With Other Savings Programs?
Below is a table of how different registered accounts compare.
| Home Buyers Plan (HBP) | Tax Free Savings Account (TFSA) | First Home Savings Account (FHSA) | |
| Key Features | Withdraw up to $60,000 (or $120,000 per couple) from your RRSP, tax-free, to buy or build your first home. | Contribute after-tax dollars; make tax free capital gains, withdrawals are completely tax-free. | Combines RRSP + TFSA benefits; contributions deductible and withdrawals tax-free for first-home purchases. |
| Benefits | Lets you use your existing retirement savings for a down payment; no tax upfront; acts as an interest-free loan to yourself. | Withdraw any time, for any reason; all investment growth (interest, dividends, capital gains) is tax-free; no repayment required. | Best of both worlds: tax deduction on contributions and tax-free withdrawals; can transfer unused funds to RRSP. |
| Drawbacks | Must repay within 15 years; missed payments become taxable income; money withdrawn loses potential investment growth. | No tax deduction on contributions; lower annual limit; easy access can reduce long-term savings. | Must be a first-time homebuyer; account must be closed within 15 years or by age 71. |
| Limits | Follows RRSP contribution limits; Withdrawals limited to $60,000 per person. | $7,000 annual limit (2024), ~$95,000 total lifetime room (for those eligible since 2009). | $8,000 annual limit, $40,000 lifetime limit. |
| Repayment | Must repay 1/15 per year, starting 2 years after withdrawal (or 5 years for withdrawals made 2022–2025). | None required. | None required, but must use funds for a qualifying home or transfer to RRSP before closing the account. |
Can You Cancel the HBP?
In most cases, you can’t cancel your participation in the Home Buyers’ Plan once funds are withdrawn. However, cancellation may be possible in certain situations. For example, if your home purchase falls through, you separate or divorce, move abroad or need to correct an ineligible withdrawal.
If you qualify, you can cancel by completing the following steps:
- Make a cancellation payment – Repay the amount you withdrew back into your RRSP by December 31 of the year after your first withdrawal. In the case of marriage or common-law breakdown, you have until the second calendar year after the calendar year of your first withdrawal under the HBP to make this repayment.
- Submit Form RC471 – Send Form RC471 Form RC471 (or a letter explaining your situation) to the CRA within 60 days after the initial repayment deadline (December 31st).
Provided that the repayment and the form (or letter) are submitted on time, your withdrawal is not taxed. However, if either step is missed or incomplete, the entire amount becomes taxable income for that year.
Additional Support for First-Time Homebuyers
In addition to the Home Buyers’ Plan, there are several federal, provincial programs, employer and community support programs designed to make homeownership more affordable for first-time buyers.
1. Federal programs
The federal government offers a few key tools that can complement the HBP:
- Tax-Free Savings Account (TFSA) – Lets you grow your savings tax-free and withdraw them at any time, providing flexibility for covering closing costs or additional down payment funds.
- Home Buyers’ Tax Credit (HBTC) – Provides a non-refundable tax credit of up to $1,500 on your income tax return to help offset closing costs such as legal or notary fees.
- First Home Savings Account (FHSA) – Combines the tax benefits of an RRSP and a TFSA, allowing you to contribute up to $8,000 per year (to a lifetime maximum of $40,000) and withdraw the funds tax-free to buy your first home.
2. Provincial programs
Some provinces and cities also offer programs that provide rebates, tax credits, or refunds to help with upfront costs. For example, in Quebec, Montreal’s Home Purchase Assistance Program allows eligible first-time buyers to recover part of the land transfer tax (welcome tax) paid upon purchase.
Similar programs exist in other provinces and municipalities, so it’s worth checking your local government website to see what assistance may apply in your region.
3. Employer and community support programs
Some employees will offer group RRSP matching. What this means is that if you pay into a group RRSP, your employer can match your contributions (to a certain extent). For example, if you contribute 5% of your $80,000 salary and your employer matches it 1:1, that’s an extra $4,000 added each year. These funds can also be used under the HBP, helping you reach your down payment goal much faster.
In addition, some community organizations and local housing initiatives offer grants or forgivable loans for first-time buyers, especially for newcomers or lower-income families. These programs vary by region, so it’s worth checking local resources or speaking with a realtor or financial advisor to see what may apply in your area.
Final Thoughts
The RRSP Home Buyers’ Plan (HBP) can help Canadian Residents with RRSP savings when purchasing their first home.
The HBP, acts as an interest-free loan to yourself. It helps free up short term cash making it faster to save for a down payment on your first home. However, as with any significant financial decision, it’s essential to consider the program’s requirements, repayment obligations, and impact on your retirement savings. For most people, it often makes more sense to maximize contributions into your FHSA, before using the HBP. However, for custom advice, it is best to speak to a financial expert.
Need An Expert?
Buying your first home and navigating programs like the HBP can feel overwhelming. A qualified real estate agent can guide you through the process and connect you with their trusted network of financial advisors and mortgage brokers who can help you make informed decisions.
Contact a realtor today to get personalized advice and take the next step toward buying your first home with confidence.
