First-Time Home Buyers

Buying your first home can be a very emotional purchase, often both stressful and exciting. Allowing yourself plenty of time to prepare can reduce the stress and replace it with excitement.

One of the biggest advantages for every first-time home buyer (FTHB) is the First-Time Home Buyers’ Plan. This allows every FTHB with an RRSP, to withdraw up to $35,000 for a down payment on their first home without immediate tax penalties, as long as the contributions were made more than 90 days prior to the withdrawal.  To avoid paying any income tax on the amount withdrawn, funds must be paid back to the RRSP over 15 years in equal installments.  Of course, you have the option to pay your HBP off sooner if you wish.  Saving for your first home through an RRSP means bigger savings by lowering your income taxes and putting even more money in your pocket towards a down payment.  The key is to ensure you don’t contribute more to your RRSP than will benefit you from a tax perspective, and our own Betty Anne Flynn, Certified Financial Planner can assist you with that.

It's important to note, the Home Buyers’ Plan can only be used by first-time home buyers.  This means that at the time of the withdrawal, you have not owned a home for the past four years.  Also, the home must be your primary residence and located in Canada.  Mobile homes, co-op units, and shares in a co-operative housing corporation also qualify.

To apply for your Home Buyers’ withdrawal, you must apply by completing CRA form T1036 with the credit union. Our experts are here to answer any questions you may have regarding this program.

Other important withdrawal information:

• You can withdraw from any number of RRSPs, with different financial institutions, provided your total withdrawals do not exceed $35,000.
• A withdrawal is not permitted from a locked-in RRSP.
• Amounts withdrawn will be reported on a T4RSP in the year withdrawn.

Home Buyers’ Plan Repayments

You are required to repay the amount withdrawn under the HBP, without interest, over a 15-year period that will begin in the second year following the year you withdrew the money. On your income tax return, you will designate what portion of your total RRSP contributions are repayments under the HBP, and therefore not deductible from income. If you repay less than the specified annual repayment, you will be taxed in that year on the portion you did not repay.  If you repay more than the specified annual repayment amount in a year, but not the whole balance of the withdrawal, your required repayments in subsequent years will be reduced.