An overview of the Home Buyer Plan (HBP).
The HBP is a program for first time home buyers withdraw up to $35,000 from their Registered Retirement Savings Plan (RRSPs) to help buy or build a home. If you are a couple, you can each withdraw $35,000 for a total of $70,000.
Any funds you withdraw through the HBP must be repaid within 15 years, with the first payment being due 2 years after your withdrawal. You are obligated to repay the minimum annual amount each year, which is the amount you borrowed divided by 15.
So as an example, if you borrowed $15,000 from your RRSP as a first-time buyer you would have re-pay at least $1,000 annually started in 2 years. In the event you don’t make the minimum payment for a year, this will become part of your taxable income. A couple important things to note. To use any funds in your RRSP, it must be in your account for a minimum of 90 days before your purchase.
For repayments, this doesn’t affect your current contribution room, it is simply a repayment of a previous contribution.
You are able to use the new First Home Savings Account (FHSA) & the Home Buyer Plan in the same home purchase.
So, the main advantages of this account as a first time buyer are there is no withholding tax & you can potentially increase your down payment savings with proper tax planning.
If you are thinking about using this program you should talk to your accountant and lawyer on how to properly use it and if you qualify.
Here is a link to the Government of Canada's website on this program - Click Here to View