The ins and outs of Home Buyers’ Plans

by | Nov 13, 2013 | Investing

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This is a guest post by Brett Johnson, an investment advisor with National Bank Financial. 
Are you considering purchasing a home in the near future? Have you considered using your RRSP to become a homeowner?
The Home Buyers’ Plan (HBP) is a program that allows an annuitant to withdraw up to $25,000 from a retirement savings plan (RRSP) to buy or build a qualifying home that will serve as a principal place of residence.

What qualifies?

A qualifying home is a housing unit located in Canada. Single-family homes, semi-detached homes, townhouses, mobile homes, condominium units, and apartments in duplexes, triplexes, fourplexes, or apartment buildings all qualify.
A share in a co-operative housing corporation that entitles you to possess, and gives you an equity interest in housing, also qualifies.

Important guidelines for the purchaser

  1. Needs to enter into a written agreement to buy or build a qualifying home.
  2. Intends to occupy the qualifying home as the principal place of residence
  3. Be considered a first-time home buyer (please refer to your Mortgage Specialist for further information)
  4. The amounts withdrawn must be paid back over a period of no more than15 years
  5. A minimum amount of 1/15 of the amount withdrawn must be repaid into the RRSP each year
  6. The repayment period starts the second year following the year the withdrawals are made

Common questions

What is the difference between a Mortgage RRSP and the Home Buyers Plan?
The Home Buyers Plan is typically used as a down payment on an initial home purchase. A Mortgage RRSP is used to finance the entirety of a home purchase excluding the deposit.
If you have purchased a home in the past, can you still qualify for the Home Buyers Plan?
Yes, however this is dependent on the time between the previous ownership and present day, as well as your marital status (please refer to your Mortgage Specialist for further information).
How quickly does the home have to be purchased and/or built after the RRSP withdrawal?
The home needs to be purchased or built by October 1st.

Reminder: The deadline for the 2013 tax year RRSP contributions is March 3rd, 2014. The amount of RRSP contributions you can deduct on your tax return for a given year is determined by your RRSP deduction limit. This limit can be found on the ‘RRSP Deduction Limit Statement’ which appears on your latest Notice of Assessment.
Happy holidays from Johnson Wealth Management Group!
Brett Johnson, B. Mgt., PFP
Investment Advisor – Johnson Wealth Management Group
National Bank Financial
National Bank Financial is an indirect wholly-owned subsidiary of National Bank of Canada. National Bank of Canada is a public company listed on the Toronto Stock Exchange (NA:TSX) National Bank Financial and National Bank of Canada are not affiliated with Mortgage Alliance or Kirkpatrick Mortgages and does not endorse any service offered. The information contained herein has been prepared by Brett Johnson. The opinions expressed herein do not necessarily reflect those of National Bank Financial. The particulars contained herein were obtained from sources we believe to be reliable, but are not guaranteed by us and may be incomplete. Please consult your investment advisor to obtain complete information. The content of this Internet site is intended only for residents of the province of Alberta. The present document may not be reproduced either wholly or in part. It must not be distributed or published or be mentioned in any way whatsoever. No mention of the information, opinions and conclusions it contains may be made without the express written pre-approval of National Bank Financial for each instance.