Home Buyers' Plan (HBP): RRSP Withdrawal Guide for 2025

RefinancePro.club

The Home Buyers' Plan (HBP): Using Your RRSP to Buy Your First Home

The Home Buyers' Plan (HBP) is one of the most powerful tools available to Canadian first-time buyers for building their down payment. This fédéral program allows you to withdraw funds from your RRSP without triggering immédiate taxation, provided you repay them within 15 years. Following changes introduced in the 2024 fédéral budget, the withdrawal limit was increased from $35,000 to $60,000 per person, offering a significant advantage in the context of high real estate prices.

HBP Eligibility Conditions

Be considered a first-time home buyer: it is necessary to not have owned a home that was your principal residence during the four calendar years preceding the withdrawal.
Have a written agreement to purchase or build a qualifying home in Canada.
Intend to occupy the home as your principal residence within one year of purchase or construction.
Be a resident of Canada at the time of the withdrawal and until the home is purchased.
The funds must have been deposited in the RRSP at least 90 days before the withdrawal.
Have no outstanding HBP balance from a previous participation in the plan.

How the HBP Withdrawal Works

Verify your eligibility: Confirm that you meet all eligibility conditions, including first-time home buyer status and the 90-day rule. If you have a previous HBP repayment in progress, it must be fully repaid before you can participate again.
Complete Form T1036: Submit Form T1036 'Home Buyers' Plan (HBP) - Request to Withdraw Funds from an RRSP' to your financial institution. The institution will process the withdrawal without source tax withholding.
Make the withdrawal and buy your property: The withdrawn funds must be used to purchase or build a qualifying home. You have until October 1 of the year following the withdrawal to acquire or build the home. You may make multiple withdrawals within the same calendar year, as long as the total does not exceed $60,000.
Begin repayment: Repayment begins in the second year after the withdrawal. It is necessary to repay a minimum of one-fifteenth per year over 15 years. Repayments are made as RRSP contributions that you designate as HBP repayments on your tax return.

Advantages and Strategic Considerations

The HBP offers a dual tax advantage: RRSP contributions are tax-deductible, and the withdrawal is tax-free if repaid on schedule. However, it is important to consider the opportunity cost: funds withdrawn from the RRSP no longer benefit from tax-sheltered growth during the repayment period. For Quebec buyers, the HBP can be combined with the FHSA (CELIAPP) and municipal homeownership assistance programs to maximize the available down payment. An AMF-certified mortgage broker can help you develop an optimal strategy that accounts for your overall tax situation.

Frequently Asked Questions

What is the maximum amount I can withdraw from my RRSP under the HBP?

Since 2024, the maximum HBP withdrawal is $60,000 per person (previously $35,000). If you are buying with a spouse who is also an eligible first-time home buyer, you can withdraw a combined total of up to $120,000 from your respective RRSPs.

Do I have to repay the amount withdrawn under the HBP?

Yes. Repayment is made over 15 years, at a rate of one-fifteenth of the total withdrawn amount per year. The first repayment is due no later than the second year following the withdrawal. If you do not repay the minimum required amount in a given year, the difference is added to your taxable income for that year, at both the fédéral and provincial level (Revenu Québec).

Do the funds need to be in the RRSP for a certain period before an HBP withdrawal?

Yes, the funds must have been deposited in the RRSP at least 90 days before the withdrawal. This rule is intended to prevent taxpayers from contributing to an RRSP solely for the tax deduction and immediately withdrawing the funds for a down payment.

Can I use the HBP if I have previously owned a home?

Yes, provided you have not owned a home that served as your principal residence during the four calendar years preceding the withdrawal. For example, if you sold your property in 2021, you could be eligible starting in 2026, subject to meeting all other conditions.

Can I use the HBP and FHSA at the same time?

Yes, it is possible to combine the HBP and the FHSA to maximize your down payment. An eligible buyer could potentially accumulate up to $60,000 through the HBP and up to $40,000 through the FHSA, for a total of $100,000 per person. Both programs have distinct eligibility conditions that must be met separately.

What happens if I don't buy a property after withdrawing HBP funds?

If you do not purchase or build a qualifying home before October 1 of the year following the withdrawal, it is necessary to repay the full amount withdrawn to your RRSP before that deadline. Failing that, the amount will be added to your taxable income.