11 Tips on How to Participate in the Home Buyers’ Plan

Planning to buy a home for the first time in Edmonton? If you have a Registered Retirement Savings Plan (RRSP), it’s your lucky day! Introducing the Home Buyers’ Plan (HBP).

With the HBP, eligible individuals can withdraw funds from their RRSPs to buy a home for themselves or for a related person with a disability. 

Are you eager to maximize your financial benefits? Dive in to learn more!

1. Check Your Eligibility

The Canadian government created the Home Buyers’ Plan program. The primary goal? To help eligible first-time homebuyers. To start, ensure you meet the necessary eligibility conditions.

First-time Home Buyer Status

One of the primary eligibility criteria is being a first-time home buyer. This term might seem straightforward, but there’s a specific definition tied to it.

It refers to individuals who haven’t owned a home that they occupied as their primary residence in the past four years.

This four-year period starts on January 1st of the fourth year before you plan to make an HBP withdrawal and ends 31 days before the withdrawal.

Special Provisions

If you aren’t purchasing a home for yourself but for a related person with a disability, special provisions allow you to utilize the HBP.

It’s important to ensure that the home you’re buying will better cater to the needs of the PWD than their current residence.

Residency Status

Being a resident of Canada is another critical eligibility requirement. You need to ensure your residency from the time of the HBP withdrawal right up until the home’s purchase or build date.

If there are changes in your residency status post-purchase, it can affect your HBP participation and repayment terms.

2. Review RRSP Accounts

The Home Buyers’ Plan revolves around RRSPs. However, not all RRSPs are created equal. Understanding the nuances between them is essential for a seamless HBP experience.

Distinguishing Between RRSP Types

It’s pivotal to note that some RRSPs, like locked-in RRSPs or group RRSPs, don’t allow HBP withdrawals.

Familiarizing yourself with the types of RRSPs you hold can save you from potential roadblocks. It can also save you from taxable income penalties down the line.

90-day Contribution Rule

Financial planning is all about timing. When considering an HBP withdrawal, remember the golden rule. Your RRSP contributions must remain in the RRSP for at least 90 days before they’re eligible for withdrawal.

If you rush and make a withdrawal from contributions that haven’t met this threshold, it can affect your tax return. This can cause you to miss out on valuable tax deductions.

3. Plan Your Withdrawal Amount

Purchasing a home is about ensuring you have the necessary funds on hand. Utilizing the Home Buyers’ Plan is a strategic move to supplement your financial resources.

However, there are guidelines and limits that need your attention.

Estimate Your Home Purchase Requirements

Before even considering an HBP withdrawal, ascertain the exact amount you’ll need for your home purchase.

This includes not just the purchase price but also additional costs. This also includes:

  • Closing fees
  • Legal charges
  • Inspection costs
  • And potential renovations.

The Edmonton housing market can be competitive, so having a clear savings goal can give you an edge when bidding for your desired property.

$35,000 Cap Significance

The HBP is generous, but it does have its limits. Currently, the federal government allows a maximum withdrawal of $35,000 from your RRSP. Remember, this is a per-person limit.

Therefore, if you’re purchasing a home with a partner or spouse, both of you can combine your HBP withdrawals.

Tax Implications

One of the advantages of the HBP withdrawal is that amounts up to the cap aren’t added to your taxable income for the year.

As such, staying within this limit ensures you’re harnessing its full potential. You can enjoy the benefits of this interest-free loan without worrying about an increased tax bill.

4. Complete Required Paperwork

The Home Buyers’ Plan isn’t just about tapping into your savings. There’s documentation that ensures the process remains in line with the government’s guidelines.

Form T1036 – A Crucial Document

Every HBP withdrawal requires you to fill out Form T1036. This form, provided by the Canada Revenue Agency (CRA), signifies your intention to use the withdrawn funds for a home purchase.

It’s important to remember that you need to fill out this form for each eligible withdrawal. Your financial institution can provide you with this form or guide you to its online version.

Official Record Keeping

The importance of documentation can’t be stressed enough. The following serve as a testament to your commitment to the HBP:

  • The forms you complete
  • Any correspondence from your financial institution or the CRA.

Ensure you keep copies of all paperwork. They can be useful for future reference, especially during the HBP repayment phase or if there are any discrepancies in your HBP balance.

5. Track Deadlines

When leveraging the benefits of the Home Buyers’ Plan, keeping track of key dates is paramount.

Adherence to these timelines ensures that you remain compliant with the program’s regulations. It also makes sure you can fully enjoy its tax advantages.

October 1st Deadline Significance

Once you’ve made an HBP withdrawal, the clock starts ticking. By October 1st of the year following your withdrawal, you must have purchased or built the qualifying home.

This timeline gives you an opportunity to navigate the housing market or oversee the construction of your new property.

Conditions and Potential Extensions

Sometimes, unforeseen circumstances may hinder your ability to meet the October 1st deadline. Recognizing this, the federal government offers provisions for extensions under specific conditions.

If, for instance, the delay is due to reasons beyond your control, you might be eligible for an extension.

Always keep open communication with relevant authorities. This is to stay informed and make use of available concessions.

6. Utilize the First Home Savings Account (FHSA)

The Canadian government introduced the First Home Savings Account in 2023. This scheme augments the HBP, providing additional avenues for potential homeowners.

Dual Withdrawal Possibility

From April 1, 2023, eligible first-time homebuyers can make qualifying withdrawals from both the FHSA and HBP.

This provision amplifies your accessible funds. It bolsters your purchasing power in the competitive real estate landscape.

Meeting All Conditions

Tapping into both the FHSA and HBP comes with its own set of eligibility requirements. Ensure that you’re aware of these criteria and that all conditions are met. This includes understanding the following:

  • Contribution limits
  • Eligible contributions
  • And the specific timeline for using the withdrawn funds for a home purchase.

7. Plan for Repayment

When you choose to leverage the RRSP Home Buyers’ Plan, you’re committing to a long-term repayment plan. Understanding this commitment and planning for it is crucial. This is to maximize the benefits of the HBP and ensure a smooth financial journey.

The 15-Year Commitment

The RRSP Home Buyers’ Plan has a defined 15-year repayment period. It’s essential to remember that this isn’t just a suggestion; it’s a requirement.

Each year, you are expected to repay a minimum payment of the total withdrawn amount divided by 15. Failing to meet this yearly payment will result in having to declare the missed amount as income on your tax return. This will subsequently affect your taxable income for that year.

Keeping Track of Your HBP Balance

One of the unique features of the HBP is the potential for future participation. If you’ve repaid your previous HBP withdrawal in full and meet all other eligibility criteria, you can benefit from the HBP again.

Therefore, diligently monitoring your HBP balance becomes crucial. By doing so, you not only ensure that you’re on track with your repayments.

But, you also ensure to keep the door open for future opportunities should you decide to purchase homes again.

8. Stay Updated with CRA

Navigating the intricacies of the Home Buyers’ Plan isn’t just about withdrawing and investing your funds.

Regular interactions with the Canada Revenue Agency (CRA) play a role in ensuring a smooth trip from withdrawal to repayment.

Prepare for CRA Interactions

Throughout your HBP journey, from making a withdrawal to the annual repayment, you’ll be engaging with the CRA.

Whether it’s submitting the forms or confirming details, it’s essential to be prepared for these interactions.

Regularly checking the CRA’s official website or reaching out to their helpline can provide clarity and keep you updated.

Consequences of Non-Adherence

It’s important to remember that the HBP isn’t merely a savings withdrawal—it’s an interest-free loan with its own set of conditions.

Not adhering to these can lead to unwanted tax implications. To avoid turning your tax-free withdrawal into taxable income, always ensure you’re in line with the HBP’s conditions.

9. Financial Preparedness

One of the most integral aspects of buying a home is ensuring you’re financially prepared. Tools like the RRSP Home Buyers’ Plan are invaluable. But a holistic approach to your finances will make the journey toward homeownership less stressful.

Budgeting is Essential

Before diving into any purchase, especially one as significant as a home, laying out a clear budget is vital. This isn’t just about how much you can spend on a home.

It’s about understanding your monthly expenses, from mortgage payments to utility bills. It’s also about ensuring you have a buffer for unexpected costs.

Monitor your Credit Score

In the realm of home buying, your credit score can be a make-or-break factor. Lenders look at this number to determine your creditworthiness.

Regularly checking your score and understanding what affects it can put you in a good position when seeking financing.

Tools and resources are available to help you keep an eye on your score and offer advice on improving it.

Set a Savings Goal

Beyond the amount you aim to withdraw from your RRSP for the Home Buyers’ Plan, it’s wise to have additional savings.

This can cover unexpected expenses, moving costs, or simply act as a safety net during the initial stages of homeownership. Having a goal in mind and working towards it can make this process more structured.

Use other Financial Tools

While the HBP offers great benefits, don’t forget other financial instruments at your disposal. Tax-free savings accounts, for instance, provide a flexible savings platform.

This can complement the benefits you get from the HBP. It’s about creating a diversified financial strategy that positions you best for the rigours of the housing market.

10. Consider Future Changes

The housing market, especially in bustling areas like Edmonton, is ever-changing. Coupled with the federal guidelines governing plans like the RRSP Home Buyers’ Plan, buyers must stay vigilant.

This not only includes understanding eligibility criteria for first-time home buyers’ plans. But it also includes adapting to new rules and potential shifts that could influence their home-buying decisions.

Potential Shifts in Eligibility

Past property sales play a pivotal role in determining eligibility for the HBP. For instance, many things could influence your position in the housing market, including:

  • Your principal residence status
  • Any previous HBP withdrawal
  • Or a replacement property transaction could influence your position in the housing market.

Also, there’s the four-year period post utilizing benefits like the First-Time Home Buyer Incentive. By the end of this period, if you’re contemplating selling or have already sold your home, you may face changes in your HBP balance. This could influence your future participation in the program.

Thinking of Non-Residency? Be Prepared

Edmonton’s housing market offers a plethora of types of homes. This includes single-family homes and more contemporary constructions.

If you’re considering a change in your residency status post-purchase or construction, you need to be well informed. This involves:

  • Understanding the potential additional income tax implications
  • How income after taxes will be affected
  • And the impact on your official payment period for any outstanding HBP balance.

Moreover, you’d need to be versed with the income deductions that might come into play. You also need to be versed in how they intersect with other commitments, like mortgage payments or other annual payments.

While the RRSP Home Buyers’ Plan provides an excellent platform for eligible home buyers in Edmonton, it demands foresight.

By being up-to-date and knowing plan withdrawals and payments, you ensure that your journey remains rewarding.

11. Consult an Expert

The RRSP Home Buyers’ Plan can make navigating the home-buying process a challenging affair. While resources are abundant, deciphering which steps to take or how to interpret particular rules can be daunting.

Seeking Professional Advice

Financial advisors or tax specialists are equipped with knowledge and experience. These tools will help you navigate the maze of rules and guidelines that come with the Home Buyers’ Plan.

These professionals can provide invaluable insights tailored to your circumstances, whether it be:

  • If you’re contemplating your eligibility for the program
  • Trying to decipher your notice of assessment
  • Or grappling with how an HBP withdrawal could impact your long-term retirement fund.

Especially for first-time home buyers in Edmonton, a seasoned professional can provide a clear path forward.

Leveraging Official Resources

The Canada Revenue Agency (CRA) website is a goldmine of official information on the HBP.

If you have questions about withdrawals, tax implications, or the First-Time Home Buyer Incentive, the CRA provides clarifications.

It’s a dependable resource for both understanding the basics and diving deep into specific queries related to the HBP.

Unlocking the HBP: A Stepping Stone to Your Dream Home

Among the multitude of financial tools and options available to Canadians, the Home Buyers’ Plan stands out as a beacon of opportunity.

By following these guidelines, you ensure that you’re safeguarding your financial future. When you’re ready to dive into Edmonton’s housing market, remember to reach out.

I am here to guide you every step of the way. As Edmonton’s favourite realtor, I am committed to making your home-buying experience seamless!

Picture of Amrit Hunjan

Amrit Hunjan

Founder/Realtor® Team Lead/CIR REALTY Edmonton Owner

I’m Amrit Hunjan, and I specialize in helping people buy and sell homes, backed by my experience in house construction and civil engineering. I love real estate and have been recognized for my work with awards. Whether you’re looking to move in or out, I’m here to guide you, particularly in Edmonton where I’m based.


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