First Time Home Buyer's Plan

Sometimes thinking about buying your first home can seem like a vast sea of the unknown. As you venture out on your journey to begin learning about the steps that you need to take and the information that you can obtain, it may result in overwhelming feelings. You could be seriously starting this process or thinking proactively forward to the next few years.

The Home Buyers Plan allows you to withdraw RRSP’s or Registered Retirement Savings Plan funds and apply them to the purchase or build a home for yourself or to help or purchase for someone with disability; where a person of disability refers to a relation to you by blood, marriage, common-law partnership or adoption (even if they don’t reside in the same home as you).

In order to qualify for The Home Buyers Plan you must be a first time home buyer and enter into a written agreement to purchase or build a qualifying home for yourself or to help to build or purchase for someone with disability. You cannot obtain a pre-approved mortgage to satisfy this condition. Once you use your RRSPs through The Home Buyer’s Plan you must intend to occupy the qualifying home as your primary place of residence no later than one year after purchase or build. Alternatively, once you occupy the home there is no length of time that you are required to reside there.

Even if you or your spouse or common-law partner has previously owned a home under The Home Buyers Plan you may still be considered a first-time home buyer. In all scenarios your repayable Home Buyers Plan balance must be zero on January 1st of the year of the withdrawal.

As a condition for using the Home Buyers Plan, only a person who is the RRSP plan holder is qualified to withdraw funds. It is also important to know that the RRSP issue will not withhold tax on these amounts. It is also important to know that you may not be able to withdraw from a locked in or group RRSP. This means that when you are choosing an RRSP you should be aware of all RRSP plan features.

The conditions for qualifying through The Home buyers Plan for withdrawal is that you must be a resident of Canada, you must complete Form T1036 for each eligible withdrawal, you must receive all withdrawals in the same calendar year, you cannot withdraw more than $25, 000 and neither you nor your spouse, common-law partner or person with disability that you help to purchase or build for can own the home more than 30 days before the withdrawal is made.

Normally all RRSP withdrawals must be repaid within 15 years; with the Home Buyers Plan you will be required to repay an amount to your RRSPs each year until your HBP (Home Buyers Plan) is a balance of zero. If you do not repay the amount due for a year, you will be required to include it in your income for that year.

For those of you ready to delve right into using the program please be aware that your RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the HBP (Home Buyers Plan). If they don’t remain in the RRSP for at least 90 days they may not be deductible for any year.

The Home Buyers Plan is an excellent way to boost savings for first time home buyers towards their down payment. It’s a Federal tax-free option that can also provide assistance to families aiding a loved one with the purchase or build of a home. Providing the RRSP holder meets the conditions to qualify for the Home Buyers Plan this may be an option that suits them.

To find out more about closing costs associated with being a first time home buyer click here.

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Lisa Fedele

Lisa Fedele

CENTURY 21 Heritage Group Ltd., Brokerage*
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