All the Numbers

The Home Buyers' Plan

From the All the Numbers wiki · Savings accounts

ITA 146.01 lets a first-time buyer withdraw from an RRSP without tax, on condition that the money goes back. It is a loan from your own retirement savings, which is why All the Numbers counts it as borrowed money when it asks whether the down payment is covered. The same idea for education is the Lifelong Learning Plan.

The rules

  • $60,000 maximum per person.[1]
  • Who qualifies. You must not have lived in a home you owned in the four preceding calendar years (the test runs to 31 days before the withdrawal, and also looks at your spouse for a home you lived in). You need a written agreement to buy or build, the home cannot have been acquired more than 30 days before the withdrawal, and you must acquire it before 1 October of the following year.[2]
  • Repaid in fifteen equal annual instalments: each year's minimum is the outstanding balance divided by the years left in the 15, starting the second year after the withdrawal.[3] For withdrawals in 2022 to 2028 the start is the fifth year after the withdrawal instead of the second.[4]
  • A repayment is not deductible: you already took the deduction when the money went in, and it uses no RRSP room.[3]
  • Miss an instalment and the shortfall is added to your taxable income that year, and the balance is reduced by it anyway.[3]
  • After the year you turn 71 you can no longer repay: a repayment has to go into your own RRSP, and the RRSP ends that December. Whatever is still owed is not taxed all at once. Each later year, the instalment you would have repaid is added to your taxable income instead, until the fifteen years run out. The same applies to the Lifelong Learning Plan.[5]
  • The program started in 1992, so an opening balance entered into All the Numbers cannot predate it.[6]
  • The 90-day rule: a contribution made within 90 days of the withdrawal cannot be deducted, to the extent it is withdrawn.[7]
  • Your HBP balance must be nil at the start of the year to open a new one.

What the engine does

  • Caps the withdrawal at the limit,[1] and builds the fifteen-year schedule including the relief window.
  • Repays the minimum each year, and no more. The repayment goes into your own RRSP in December (in November of the year you turn 71, before the RRSP becomes a RRIF). It is paid from spare cash first, then from non-registered savings, then from your TFSA, in your withdrawal order. All the Numbers never takes money out of an RRSP or RRIF to repay: that withdrawal would be taxed as income, so it saves nothing. This is our assumption of a household that keeps up its repayments. The law also lets you repay in the first 60 days of the next year; All the Numbers repays in the year.[8]
  • Adds the part of the minimum that those savings cannot pay to that year's income, as the Act requires.[3]
  • From the year after the owner turns 71, adds each year's instalment to income with no money moving, until the balance is gone.[5]
  • Warns that eligibility is asserted, not verified — the engine knows your dates, not your history.
  • Takes the withdrawal to come from RRSP money held at least 90 days, so no contribution loses its deduction. If you put money into the RRSP in the three months before the closing, part of that contribution may not be deductible; All the Numbers does not trace it.[9]
  • In the down-payment view, counts an HBP amount as borrowed money, not savings.

What it deliberately does not

It does not check first-time-buyer status, the four-year rule, or whether the home is bought before October 1 of the following year; the withdrawal is taken to qualify when you tick it. The HBP can be combined with the First Home Savings Account for the same purchase.

See also: would a lender write the mortgage, land transfer tax.

See also

  • Buying a cottage · A cottage is a second home for you and your family, kept alongside the home you live in. It can be bought with as little as 5% down if it is usable all year, or 10% if it is seasonal, but first-time buyer help, the Home Buyers' Plan and the FHSA cannot pay for it.
  • Closing costs and the cash to close · The cash a buyer pays on closing day is the down payment, the land transfer tax after any first-time buyer refund, the taxes and fees on the purchase, and one amount for legal and inspection costs that starts at $3,000. Adjustments are not worked out unless they are added to that amount.
  • Land transfer tax · Ontario charges a tax on the price of a home, rising from 0.5% to 2.5% in brackets, and Toronto adds a second one of its own. A first-time buyer gets a refund of up to $4,000 from Ontario and $4,475 from Toronto.
  • RRSP room, deduction and withdrawals · Room accrues at 18% of earned income up to the annual cap, contributions earn a deduction refunded the following April, and withdrawals are taxed as income. The plan assumes you start with no carried-forward room unless you say otherwise.
  • The First Home Savings Account · $8,000 a year with one year of carryforward and $40,000 for life, deducted from income and withdrawn tax-free for a first home. The refund is credited the following April, and the account winds up into an RRSP if it is never used.
  • The Lifelong Learning Plan · Up to $10,000 a year and $20,000 in total can come out of an RRSP, untaxed, to pay for full-time study, and is repaid over ten years. A missed repayment is added to income. All the Numbers does not offer it.
  • The savings accounts at a glance · The TFSA, RRSP, FHSA, RESP, RRIF and non-registered account each have their own room, tax treatment and withdrawal rule. This page gives one short paragraph on each, with the entry that covers it in full.
  • When the plan runs short of cash · When a month needs more money than the plan has, it draws savings in a set order, then borrows on a home equity line at 5.13% and an unsecured line at 8.38%, as far as a lender would lend. When no lender would lend more, the projection stops.
  • Where the down payment comes from · The cash to close is assembled from the plan's projected balances in a fixed order — FHSA, TFSA, unregistered, HBP, then taxed RRSP — and each dollar is priced for what taking it costs.
  • Would a lender write the mortgage? · Lenders test a mortgage against two ratios, GDS at 39% and TDS at 44% of gross income, using a stress-test rate of the contract rate plus 2 points or 5.25%, whichever is higher. All the Numbers runs this screen on the income entered for today.

References

  1. ↑Income Tax Act s. 146.01 · Home Buyers' Plan: the RRSP withdrawal per person per calendar year excluded from income (ITA 146.01(1) "regular eligible amount" (h)); the HBP balance must be nil at 1 January of the withdrawal year (paragraph (i)); raised for withdrawals after 16 April 2024 · $60,000 · effective 2024-04-17
  2. ↑Income Tax Act s. 146.01(1) definitions and 146.01(2), (2.1) · Home Buyers' Plan eligibility: no owner-occupied principal residence from the start of the fourth preceding calendar year to the 31st day before withdrawal (same test applied to a spouse for a home the individual inhabited); a written agreement to acquire or build must predate the withdrawal; the home must not have been acquired more than 30 days before it; and it must be acquired before 1 October of the following calendar year (the "completion date") · See the source · effective 2024-04-17
  3. ↑Income Tax Act s. 146.01(3), (4) · Home Buyers' Plan repayment: income inclusion for a year is [(A - B - C) / (15 - D)] - E, so the minimum annual repayment is the outstanding balance divided by (15 - D) where D is the lesser of 14 and the years elapsed since the clock started; repaying less than the minimum adds the shortfall to income and reduces the balance anyway; a designated repayment is not deductible and consumes no RRSP room, and amounts transferred directly from an FHSA, RRSP, RPP, RRIF or DPSP are excluded premiums that cannot be designated · 15 years · effective 1994-01-01
  4. ↑Income Tax Act s. 146.01(4.1), (4.2) · Home Buyers' Plan temporary repayment relief: where the completion date falls after 2022 and before 2030 — withdrawal years 2022 through 2028 — the repayment clock starts on 1 January of the fifth year after the withdrawal instead of the second (ITA 146.01(4.1) reads 'first calendar year' in D as 'fourth', and 146.01(4.2) nils the inclusion for up to three further years) · See the source · effective 2024-06-20
  5. ↑Income Tax Act s. 146.01(3), (4), 146.02(3), (4) and 146(2)(b.4); CRA — The HBP participant reaches the age of 71 ("You will not be able to repay any funds you withdrew from your RRSP after the end of the year you reach the age of 71") · Home Buyers' Plan and Lifelong Learning Plan after the year the participant turns 71: a repayment must be paid to an RRSP under which the participant is the annuitant (146.01(3), 146.02(3)), and the RRSP matures by the end of that year (146(2)(b.4)), so no later repayment can be designated; the annual inclusion formula has no age test, so each later year's scheduled amount ((A - B - C) / (15 - D), or / (10 - D) for the LLP) is included in income and the balance falls by it, until the schedule ends; nothing is included all at once · effective 2007-01-01
  6. ↑Income Tax Act s.146.01 · Home Buyers' Plan withdrawals exist from 1992; an opening balance cannot predate it · 1992 · effective 1992-02-26
  7. ↑Income Tax Act s. 146(5)(a)(iv.1) · RRSP contributions withdrawn as an HBP eligible amount less than 90 days after they were paid are not deductible (ITA 146(5)(a)(iv.1)); the attribution order is earnings first, then premiums in the order paid, so an established balance absorbs a fresh contribution before it becomes the withdrawn dollar · effective 1994-01-01
  8. ↑Our convention: a disciplined household repays the minimum (Income Tax Act s. 146.01(3), 146.02(3) designated repayments; s. 146.01(4), 146.02(4) the shortfall is income) · Each year the Home Buyers' Plan (and Lifelong Learning Plan) minimum is repaid into the participant's own RRSP in December (November in the year they turn 71, before the RRSP becomes a RRIF), paid from the month's spare cash, then non-registered savings, then the TFSA, in the household's withdrawal order; an RRSP or RRIF is never drawn to repay; only the part those cannot fund is added to income. Nothing above the minimum is repaid · effective 2026-10-14
  9. ↑ITA 146(5)(a)(iv.1): contributions withdrawn as an HBP eligible amount less than 90 days after they were paid are not deductible; the balance held before them is withdrawn first. · A Home Buyers' Plan withdrawal is taken to come from RRSP money held at least 90 days, so no contribution loses its deduction under the 90-day rule; a contribution made in the 90 days before the withdrawal is not traced · effective 2026-10-14