Saving for a home can feel out of reach, especially if you’re a first-time home buyer trying to enter Canada’s competitive real estate market. Fortunately, the federal government offers a way to tap into your RRSP for a down payment, without immediate tax penalties. The Home Buyers’ Plan (HBP) gives first-time buyers a practical option for making homeownership possible.

Using Your RRSP for a Down Payment: What You Need to Know

An Introduction to the Home Buyers’ Plan

The Home Buyers’ Plan is a federal program that allows eligible Canadians to withdraw up to $35,000 from their Registered Retirement Savings Plan (RRSP) to put toward a qualifying home. If you’re buying with a spouse or partner, you can withdraw up to $70,000 together. These withdrawals are tax-free as long as you follow the rules and repay the funds over time.

This program is especially valuable in a high-priced housing market, where every dollar counts. Using your RRSP down payment can increase your buying power and help you secure a better mortgage rate by reducing your overall loan amount.

Withdrawal Limits and Eligibility

Your RRSP down payment must meet two key conditions: the funds must be in the RRSP for at least 90 days before withdrawal, and you must be a first-time home buyer, defined as someone who hasn’t owned a home in the last four years. You must also plan to live in the property as your primary residence within a year.

It’s important to verify eligibility early in your planning. If you’ve recently sold a home or jointly owned one with someone else, speak to a mortgage professional to confirm whether you still qualify.

How Repayment Works

You’ll have 15 years to repay your RRSP withdrawal, starting in the second year after buying your home. Each year, you must repay 1/15 of the amount withdrawn. If you miss a payment, it’s taxed as income. Keeping up with repayments is key to avoiding penalties.

Some buyers choose to set up automatic RRSP contributions to simplify repayment and avoid surprises at tax time. Planning ahead ensures that the Home Buyers’ Plan works for you long-term.

Applying for the HBP

To start, complete Form T1036 and submit it to your financial institution. They’ll process the RRSP withdrawal. Make sure to coordinate the timing so your RRSP down payment is available when needed.

Ask your bank or advisor about expected processing times and whether any additional documentation is required. Staying organized will help you avoid delays in your home purchase.

Pros and Cons to Consider

Pros:

  • Access up to $35,000 (or $70,000 for couples) tax-free
  • Helps reduce your mortgage amount and interest costs
  • Makes homeownership more accessible for first-time buyers

Cons:

  • Reduces your retirement savings temporarily
  • Requires consistent repayment over 15 years
  • Missed payments are taxed

Is the Home Buyers’ Plan Right for You?

Using an RRSP down payment may be ideal if you’re a first-time home buyer with savings but need a little more to meet your down payment goal. Couples can benefit even more by combining withdrawals. Just make sure you can commit to the repayment schedule.

Use Your RRSP to Step Into Homeownership Today

The Home Buyers’ Plan gives Canadians a smart, tax-friendly way to access an RRSP down payment. Knowing how to use it wisely helps set the stage for successful homeownership.

Northwood Mortgage can help you navigate the HBP and determine if it fits your financial goals. Reach out to Northwood Mortgage today at 888-495-4825 or click here to get in touch online.