Using Your RRSP to Buy a Home

In Canada, first time home buyers may withdraw up to $20,000 from their RRSP's, for the purpose of buying or building a qualifying home.

A major benefit of this program is that the RRSP issuer will not withhold tax on the amount of the withdrawal nor will you have to claim the amount as income. However, there are a number of conditions that have to be met if you take advantage of this program:

• The amount you withdraw must be repaid to your RRSP within fifteen years, with a minimum annual payment of 1/15th of the amount withdrawn. If repayment is not made for any given year, the minimum repayment is included as taxable income for that year. (To participate you have to withdraw the amount using form T 10036 Applying to Withdraw an Amount under the Home Buyers Plan. This completed form should be given to your RRSP issuer along with the certification that you meet or intend to meet certain conditions as detailed below)
• You cannot have previously participated in the plan in any prior year.(An exception to this rule is a recent change -effective in 1998- which allows an individual who has repaid all amounts previously received under the plan to participate as if no amount had been previously received and no home had been owned in the previous 5 years.)
• You have to be a Canadian resident.
• Your withdrawal request must be made in the same year that you wish to participate in the Home Buyers Plan.
• You must enter into a written agreement to purchase or build a qualifying home.
• Multiple withdrawals are permitted to a maximum of $20,000.
• Each of you and your spouse can participate in the Plan and withdraw $20,000 from your own RRSP's.
• You have to be considered a First Time Home Buyer. A First Time Home Buyer is considered to be someone who has not owned a home, which you occupied as your principal place of residence for the last five years.
• Revenue Canada stipulates that you must have maintained the required funds in your RRSP for a minimum of 3 months before withdrawing them for the down-payment.
• In most instances, the moneys which are contributed to the RRSP cannot have been borrowed funds. Alternatively, the related loan would have to be repaid prior to the withdrawal.

QUALIFYING HOME

• It must be a housing unit located in Canada.
• It includes existing homes and homes under construction.
• Single detached family homes
• Semi detached
• Townhouses
• Mobile home
• A condominium unit
• Apartment in a duplex, triplex, fourplex or apartment building.
• A share in a Cooperative Housing Corp., provided that the share entitles you to possess, and to give you an equity stake in, a housing unit.

Should you sell your home before you have paid off your RRSP loan, you do not have to repay the remaining balance nor are you required to continue to own a home until the amount you borrowed is repaid.

If you leave the country, and you cease to be a resident of Canada, "the balance of withdrawals made under the Plan and not yet repaid must be repaid within 60 days of ceasing residency, or must be included in the individual's income for that year."

Should an individual die with an outstanding Home Buyers Plan repayment balance, the balance outstanding must be included in the deceased's income for the year. It may be possible in certain circumstances for the spouse of the deceased to take over the deceased's obligations with respect to repayment installments.

When you turn 69 and your RRSP matures, you must pay off any outstanding balance on your Home Buyers Plan or you must report it as income on your tax return.