The HBP is a program managed by Revenue Canada that allows first time homebuyers to withdraw funds from the RRSPs to buy or build a qualifying home.
As a first time homebuyer you can withdraw up to $25,000 in a calendar year out of your RRSP TAX FREE. If you purchase a home with your spouse and your spouse qualifies as a first time homebuyer, each of you can withdraw up to $25,000.
There are several conditions that have to be met under the HBP.
- You have to be a Canadian resident and occupy the home as your principal place of residence.
- You have to buy or build the qualifying home before October 1 after the year of withdrawal.
- The portion of your RRSP you intend to use towards the purchase of your home must be in your RRSP for more than 90 days.
- You have up to 15 years to pay back your RRSP starting the second year after the year of withdrawal, 1/15 of your borrowed amount must be paid back /year.
- If you don’t pay 1/15 of the borrowed amount a year, you have to add the amount as income.
- You are considered to be a first time home buyer only if you and your spouse haven’t owned and lived in a principal residence for at least four years before the date of the RRSP withdrawal.
These are some of the requirements to be able to use the first time HOME BUYER PLAN. For complete details please check Canada Revenue Agency's website.
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