A jar on a white counter, filled halfway with coins, with a label that reads House Fund; highlighting using RRSPs and the Home Buyers Plan for a down payment

How can I use RRSPs to help buy my first home?

Matthew Jackson First Time Home Buyers

As a first-time home buyer, you are probably interested in knowing how you can use your RRSPs to pay for your home. Well, I am here to tell you! In this blog post, I’ll share all the details on RRSPs and how to access those funds.

Let’s jump right in. 

 

First time home buyers plan.

If you’re a Canadian, you have access to the First-Time Home Buyers Plan (HBP). This plan allows you to withdraw $35,000 in RRSP savings ($70,000 for a couple) to put it towards the down payment of your future home. You’re essentially loaning yourself the money through your retirement savings to help purchase a home.

When you access these funds, you will have 15 years to pay back 100% of the money.

 

Getting your down payment.

If you’re in need of a down payment for a home, looking into your RRSPs is a fantastic idea. If you have those funds available, it makes good financial sense to use your RRSPs. Through the Canadian government, you may also be eligible for a tax deduction when you’re repaying the RRSP amount.

 

Who created the home buyers plan?

This program/plan was created by the Government of Canada in the 1990s to help make owning a home more accessible for Canadians. In the beginning, you could borrow up to $25,000 from your Registered Retirement Savings Plan to use as a down payment. In 2019, that changed and the maximum withdrawal amount was increased to $35,000 per person.

 

How to use your RRSP for a down payment.

To access the RRSP funds, first, you have to have the money in the account. The program is run through the Canada Revenue Agency (CRA) and they allow you access to this money tax-free. This means that the sum of your withdrawal isn’t subject to income tax and it won’t be included in your income for the year you withdraw it. 

man holding a jar filled with coins with the label savings on it, highlighting saving your your first home with RRSPs.

Saving for a home can feel overwhelming, but you may have more options than you think. For first time home buyers, you can use your RRSPs towards a down payment.

You can withdraw this money during the Home Buyers Plan as long as the money has been held within the RRSP for at least 90 days. If you have more than one RRSP account, you can withdraw from all of them as long as the individual withdrawal doesn’t add up to over $35,000.

 

How do I access the home buyers plan?

In order to access the Home Buyers Plan, you need to be a Canadian first-time home buyer. If you do not live in Canada or have purchased a home before, you cannot use the first time home buyers RRSP withdrawl. 

Secondly, the home you are purchasing has to be located in Canada as well. And, the home you’re purchasing has to be your primary place of residence. 

Lastly, like I mentioned before, you will have to repay all of the withdrawn funds within 15 years. 

 

Withdrawing the funds from your RRSPs.

In order to withdraw the money from your RRSP, you will have to fill out the T1036 Home Buyers’ Plan (HBP) Request to Withdraw Funds from an RRSP. Once you fill out the form, you will submit it to whatever financial institution that issued your RRSP account. 

If that was CIBC, for example, you would submit form T1036 to CIBC. If you’re withdrawing from multiple accounts, you will have to fill out this form for each account.

 

Becoming a first time home buyer for the second time.

Did you know you can receive first time home buyer perks a second time?

You are considered a first-time home buyer if, in the four year period, you did not occupy a home that you owned, or one that your current spouse or common-law partner owned.

Four-year period – The four-year period means the four years prior to a home purchase. The period begins on January 1 of the fourth year before the year you withdraw funds from your RRSP, and ends 31 days before the date you withdraw the funds. For example, if you are withdrawing the funds on July 31, 2021, the period is from January 1, 2017 to June 30, 2021.

 

Reach out to me to see if you qualify. 

Are you ready to see if you qualify for the Home Buyers Plan and are able to use your RRSP for your down payment? Reach out to me today and let’s discuss your situation. I’ll be able to help determine if you qualify and help you with the next steps of obtaining those funds. 

Give me a call at 250-826-3111, fill out the contact form below this article or click on the pre-approval and go through that form. I look forward to helping you purchase a home! 

For more information on being a first time home buyer, be sure to check out First Time Home Buyers: What You Need to Know.

 


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