The Canadian First Time Home Buyer RRSP Plan: How Does it Work?

There is nothing as fulfilling as someone finally getting to own a home. If you ask around, few people in Canada would love to pay rent for the rest of their lives. The stumbling block to achieving this dream, however, is the expensive home prices.

Most people don’t have the money to buy homes at once. That’s why it is always a good idea to learn of any government policies that might make it easier for you to own a home for the first time.

Therefore, prospective home buyers would be relieved to hear about the Canadian government’s first time home buyer RRSP. The first question that might come to their minds is: what is it, and what does it mean for time home buyers?

Relax, sit back and let us tell you all there is to know about the first time home buyer Canada RRSP and how it would benefit you.

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What is First Time Home Buyer RRSP?

You must be wondering, what is RRSP, and how do first-time home buyers benefit from it? Before we get to that, it would only be fair we let you know what it is.

This program allows first-time homebuyers to source funds from their Registered Retirement Savings Plans (RRSPs). They, therefore, get to pay back within 15 years after withdrawing from their RRSP.

But here’s the kicker.

A first-time home buyer can withdraw up to 35,000 from their RRSP to buy or build a qualifying home. And all that tax-free. Also, if you partner up with your spouse to buy the house, they get the exact figure to give you a cumulative figure of 70,000.

But for the home buyer RRSP withdrawal to apply to you, there are several conditions you need to meet. For starters, you must be buying a home for the first time.

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What Makes You Eligible for the First time Home Buyer RRSP?

• You can’t have owned a house before unless it is over four years ago since you owned one.
• Before withdrawing any funds from your RRSP, they should have been in your account for no less than three months.
• If you have a spouse who isn’t a first time home buyer, then you need to have not stayed in that house for over four years.
• You should have entered into or signed an agreement agreeing to buy a home.
• The home you are planning to purchase should be your primary residence for at least a year.
• If you have used the home buyer RRSP withdrawal before, you need not have any outstanding amount in your account.
• You must reside in Canada.

These eligibility criteria also apply to first time home buyer Ontario RRSP and first time home buyer BC RRSP.

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How Does First Time Home Buyer RRSP Withdrawal Work?

Now that you know what would disqualify you if you want to participate in the HBP, let’s see how it works. The first thing you’ll want to do is ensure you meet the criteria we have told you above.

After you are sure you meet the criteria, you’d have to get a copy of form T1036. You can find this form on the website of the Canadian Revenue Agency. The first section is up to you to fill and includes filling in the amount you want to withdraw. 

The 2^nd section, however, is reserved for the financial institution that handles your RRSP. After filling the 2^nd part and confirming all details, the bank will give you a T4RSP form that confirms how much you have withdrawn from your RRSP.

After that, you can now make a withdrawal and use it to buy your home. However, it is worth noting that you should withdraw the funds within a month of getting the title to your new home. If you go past thirty days, then you will lose the right not to be taxed.

After doing all that and having bought your home, you will now wait two years before starting payments. You will make the payments to your RRSP, and Canada Revenue Agency will send you a notice of assessment detailing how much you have repaid and how much is still outstanding.

RRSP First Time Home Buyer Repayment

Although the government is stepping in to help you buy a home, you will still have to pay back the money within 15 years. RRSP first time home buyer repayment is usually due two years after first time home buyer RRSP withdrawal.

To start repaying, you only have to contribute to your RRSP the year the payments are due or, if not that year, then within 60 days of the subsequent year. 

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FAQs on First Time Home Buyer RRSP, Withdrawal, Repayment, and More!

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Bottom Line: First Time Home Buyer Canada RRSP

Will the first time home buyer RRSP pay for all your expenses towards a house? Possibly not. Will it help you buy a home easier than if you wouldn’t have it? Of course, yes.

We hope you are now better enlightened regarding that program and can now take massive advantage of it. All the best. Your new home is worth it.

Check out more first time home buyer tips that’ll make your journey into homeownership easier.

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