The real estate market in many parts of Canada, and Nova Scotia, is booming right now which has led to a question about the RRSP Home Buyers Plan (HBP).
The Nova Scotia Securities Commission does not provide investment advice. We are not advising, or recommending that investors enroll in the HBP. This post is simply to educate investors on the plan so they can be an informed investor when making investment decisions.
The HBP allows investors to withdraw money from their RRSP account to purchase or build a home. Not all homes qualify for the program so make sure the home you’re interested in does.
As of March 2019, anyone using the HBP can withdraw up to $35,000 from their RRSP. The money can be withdrawn tax free, but the money must be put back into your RRSP account within 15 years. There are other conditions that must be met to be eligible for the program.
You must be considered a first-time home buyer (see the CRA website to see who qualifies as a first-time home buyer).
You must have a written agreement to buy or build a qualifying home.
You must be a resident of Canada.
You must intend to occupy the home as your principal place of residence within one year of buying or building the home.
To withdraw funds you must fill out form T1036 and send it to your RRSP issuer. The issuer will fill out the second section of the form. After your withdrawal request is approved the money will be deposited into your bank account.
You have 15 years to repay the money into your RRSP account. There is also a required minimum you need to pay each year. The repayment period begins in the second year after the year of your withdrawal. For example, if you make a withdrawal in 2020, your first year of repayment would be 2022. Even if you start your repayment earlier, your repayment period will remain the same. One important thing to know, is if you make regular contributions to your RRSP account, monthly for example, you must specifically designate these contributions as repayment contributions for them to count towards your repayment amount.
The amount you withdraw, and your repayment contributions are reported in your income tax return. You can find the remaining repayment balance owing on the CRA website.